Question
You have a portfolio P that consists of 50% Stock X and 50% Stock Y. Stock X has a beta of 0.7 and Stock Y
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You have a portfolio P that consists of 50% Stock X and 50% Stock Y. Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. Given this information, which of the following statements is CORRECT?
a. The required return on Portfolio P is equal to the market risk premium (rM rRF).
b. Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate, rRF.
c. Portfolio P has the same required return as the market (rM).
d. Portfolio P has a standard deviation of 20%.
e. Portfolio P has a beta of 0.7.
You have a portfolio P that consists of 50% Stock X and 50% Stock Y. Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. Given this information, which of the following statements is CORRECT?
| a. | The required return on Portfolio P is equal to the market risk premium (rM rRF). | |
| b. | Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate, rRF. | |
| c. | Portfolio P has the same required return as the market (rM). | |
| d. | Portfolio P has a standard deviation of 20%. | |
| e. | Portfolio P has a beta of 0.7. |
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Finance For Housing An Introduction
Authors: Cathy Davis
1st Edition
1447306481, 978-1447306481
