Alliance stock fund analysis

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Alliance Stock Fund Analysis

Chapter Eight Mini Case Study

What is the portfolio beta for each of the available stock funds?

a. Fund P:

b. Fund Q:

2. What is the generic equation for the Security Market Line (SML) that would apply to all publicly-traded stock shares, using the numerical values given for the risk-free rate (RF) and the market average rate of return (rm) that are provided in the case study above?

3. Using the Security Market Line (SML) equation that you developed in Question #2 above, calculate the required rate of return on each of the available stock funds:

a. Fund P:

b. Fund Q:

4. Based on your calculations, which stock fund appears to be most risky? Why?

5. Into which fund would you invest your inheritance funds? Why?

Reference no: EM133120222

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