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# This has to be done in an excel format. This is review for a mid term. Thank you.

Please see attached document. This has to be done in an excel format.
This is review for a mid term.
Thank you.
Risk, Return, and the Capital Asset Pricing Model
As a first day intern at Tri-Star Management Incorporated the CEO asks you to analyze the following information pertaining to two common stock investments, Tech.com Incorporated and Sam's Grocery Corporation. You are told that a one-year Treasury Bill will have a rate of return of 5% over the next year. Also, information from an investment advising service lists the current beta for Tech.com as 1.68 and for Sam's Grocery as 0.52. You are provided a series of questions to guide your analysis.
Estimated Rate of Return              .
Economy Probability Tech.com Sam's Grocery S&P 500
Recession 30% -20% 5% - 4%
Average 20% 15% 6% 11%
Expansion 35% 30% 8% 17%
Boom 15% 50% 10% 27%
Assignment
1. Calculate the expected rate of return for Tech.com Incorporated, Sam's Grocery Corporation, and the S&P 500 Index.
2. Calculate the standard deviations in estimated rates of return for Tech.com Incorporated, Sam's Grocery Corporation, and the S&P 500 Index.
3. Which is a better measure of risk for the common stock of Tech.com Incorporated and Sam's Grocery Corporation-the standard deviation you calculated in Question 2 or the beta?
4. Based on the beta provided, what is the expected rate of return for Tech.com Incorporated and Sam's Grocery Corporation for the next year?
5. If you form a two-stock portfolio by investing \$30,000 in Tech.com Incorporated and \$70,000 in Sam's Grocery Corporation, what is the portfolio beta and expected rate of return?
6. If you form a two-stock portfolio by investing \$70,000 in Tech.com Incorporated and \$30,000 in Sam's Grocery Corporation, what is the portfolio beta and expected rate of return?
7. Which of these two-stock portfolios do you prefer? Why?

Risk, Return, and the Capital Asset Pricing Model
As a first day intern at Tri-Star Management Incorporated the CEO asks
you to analyze the following information pertaining to two common stock
investments, Tech.com Incorporated and Samâs Grocery Corporation. You
are told that a one-year Treasury Bill will have a rate of return of 5%
over the next year. Also, information from an investment advising
service lists the current beta for Tech.com as 1.68 and for Samâs
Grocery as 0.52. You are provided a series of questions to guide your
analysis.
Estimated Rate of Return
.
Economy Probability Tech.com Samâs Grocery S&P 500
Recession 30% â20% 5% â 4%
Average 20% 15% 6% 11%
Expansion 35% 30% 8% 17%
Boom 15% 50% 10% 27%
Assignment
1. Calculate the expected rate of return for Tech.com Incorporated,
Samâs Grocery Corporation, and the S&P 500 Index.
2. Calculate the standard deviations in estimated rates of return for
Tech.com Incorporated, Samâs Grocery Corporation, and the S&P 500
Index.
3. Which is a better measure of risk for the common stock of Tech.com
Incorporated and Samâs Grocery Corporationâthe standard deviation
you calculated in Question 2 or the beta?
4. Based on the beta provided, what is the expected rate of return for
Tech.com Incorporated and Samâs Grocery Corporation for the next year?
5. If you form a two-stock portfolio by investing \$30,000 in Tech.com
Incorporated and \$70,000 in Samâs Grocery Corporation, what is the
portfolio beta and expected rate of return?
6. If you form a two-stock portfolio by investing \$70,000 in Tech.com
Incorporated and \$30,000 in Samâs Grocery Corporation, what is the
portfolio beta and expected rate of return?
7. Which of these two-stock portfolios do you prefer? Why?

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