Calculate the expected return for the portfolio

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Reference no: EM131451722

Q1. If you are a risk-averse investor and you decide to hold a single stock, which stock would you prefer? Use the Coefficient of Variation (CV) to determine your answer. Explain your final choice.

a. A stock with an expected return of 18% and a standard deviation equal to 10%.

b. A stock with an expected return of 6% and a standard deviation equal to 4%.

c. A stock with an expected return of 15% and a standard deviation equal to 14%

Q2. Assume you have a portfolio with the stocks and their information:

Stock	Total $ invested	Beta	Expected Return

DuPont	$25,000	0.99	10.12%
McDonald's Corp	$50,000	0.72	8.16%
Ford	$60,000	1.24	12.2%

a) Calculate Beta of the Portfolio.

b) Calculate the Expected return for the portfolio using the CAPM and the beta value for the portfolio. Assume the market risk premium (Rm - Rrf) equals 6% and the Risk free rate (Rrf) equals the rate on a 2 year treasury 0.25%.

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Reference no: EM131451722

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