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You just bought the stock A at $ 50 and you have been given the following data about the expected values in the next year.
You just bought the stock A at $ 50 and you have been given the following data about the expected values in the next year. Possible Probabilities Dividend Price states 1 30 % 10 60 2 20 % 5 55 3 10 % 2 50 4 40 % 0 45 1- Compute the expected return and standard deviation of the stock A (3 Marks) 2- 2- Explain and compute the risk premium of the stock A ( 1 Mark) 3- 3- Compute the reward to volatility ratio of the stock A ( 2 Marks ) 4- 4- Compute the expected return and standard deviation of your complete portfolio in which you allocate 40 % to A and the remaining to the Treasury Bills. The risk return is 6 %. (2 Marks) 6- 5- Explain with your own words what does represent the Capital Allocation line (2 Marks)
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