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eng111_discussion_week10_questions_and_answers - ENG 111...

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ENG 111 Discussion Week 10 Winter 2009 Q1. You have 10000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14% and Stock Y with an expected return of 9%. If your goal is to create a portfolio with and expected return of 12.2%, how muck money would you invest in Stock X? In Stock Y? ANS: Q2. Based on the following information, calculate the expected return and standard deviations: State of Economy Probability of State of Economy Rate of return Depression 0.1 -0.045 Recession 0.2 0.044 Normal 0.5 0.12 Boom 0.2 0.207 ANS:
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Q.3 You own a stock portfolio invested 25% in Stock Q, 20% in Stock R, 15% in Stock S, and 40% in Stock T. The betas for the four stocks are 0.6, 1.7, 1.15, and 1.34, respectively. What is the portfolio beta? ANS: Q.4 A stock has a beta of 1.2 and an expected return of 16%. A risk-free asset currently earns 5%. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of 0.75, what are the portfolio weights?
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