Quiz 9 2010 - Stock Y 17% 25% 1.5 Market index 14% 15% 1 R...

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DePaul University Name______________________________ Winter Quarter, 2010 FINANCE 330 INVESTMENT ANALYSIS QUIZ 9 Karen Kay, a portfolio manager at Collins Asset Management, is using the capital asset pricing model for making recommendations to her clients. Her research department has developed the information shown in the following exhibit. Forecasted Return Standard Deviation Beta Stock X 14% 36% 0.8
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Unformatted text preview: Stock Y 17% 25% 1.5 Market index 14% 15% 1 R isk-free rate 5% Forecasted Returns, Standard Deviations, and Betas a. Calculate expected return and alpha for each stock. b. Identify and justify which stock would be more appropriate for an investor who wants to i. add this stock to a well-diversified equity portfolio. ii. hold this stock as a single-stock portfolio....
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