Ch.%208%20practice - If one of the stocks has a beta of...

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FIN 3100 Chapter 8 Practice Dr. Lucy Ackert 1. A stock had returns of 36, 19, 27, -7, 6, and 13 percent over the last 6 years. a. What is the arithmetic return? b. What is the geometric return? c. What is the standard deviation of returns? 2. You have $10,000 to invest in a stock portfolio. Your choices are stock X with return of 16% and stock Y with return of 11%. Your goal is to create a portfolio with an expected return of 14.25%. How much money will you invest in stocks X and Y? 3. You own a portfolio equally invested in a risk-free asset and two stocks.
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Unformatted text preview: If one of the stocks has a beta of 1.65 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? 4. A stock has an expected return of 17%, the risk-free rate is 5.5%, and the market risk premium is 8%. What must the beta of the stock be? 5. You want to create a portfolio equally as risky as the market and have $500,000 to invest. Complete the following table: Asset Investment Beta Stock A $130,000 .85 Stock B $150,000 1.20 Stock C 1.45 Risk-free asset...
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This note was uploaded on 11/17/2011 for the course FIN 3100 taught by Professor Gillette during the Fall '08 term at Kennesaw.

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