CAPM-Portfolio Risk and Return

Assignment Help Financial Management

Reference no: EM132041830

CAPM, Portfolio Risk and Return. Consider the following information for three stocks, Stocks X, Y, and Z. The returns on the three stocks are positively vorrelated, but they are not perfectely correlated. (That is, each of the correlation coeeicients is between 0 and 1.

Stock x expected return 9.00%, standard deviation 15% Beta0.8

Stock Y expected return 10.75% standard deviation 15% adn Beta 1.2

Stock Z expected return 12.50% standasrd deviation 15% and Beta 1.6.

Fund Q has one third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium (that is, required returns equal expected returns.)

a. What is the market risk premium?

b. What is the beta of Fund Q?

What is the expected return of Fund Q?

Would you expect the standard deviation of Fund Q to be less than 15%, equal to 15% or greater than 15%? Explain.

Reference no: EM132041830

Questions Cloud

What is the company cost of new common stock financing : If underpricing and flotation costs on new shares of common stock amount to $9 per share, what is the company's cost of new common stock financing ?

Equity ratio for the original and revised balance sheets : The Ellis Corporation has heavy lease commitments. Compute the total debt to total equity ratio for the original and revised balance sheets.

What is the pure bond value of this convertible bond : If similar bonds, which are not convertible, are currently yielding 10 percent, what is the pure bond value of this convertible bond?

Calculate the gains or losses for long and short position : Calculate the gains or losses for the long and short position in a Eurodollar futures contract

CAPM-Portfolio Risk and Return : What is the market risk premium? What is the beta of Fund Q? What is the expected return of Fund Q?

Covering the shortfall in annual retirement savings : What are Richard and Monica’s alternatives in covering the shortfall in annual retirement savings? What are your recommendations?

What is exchange rate of polish zloty to the british pound : What is the exchange rate (cross rate) of the Polish zloty to the British pound? That is, how many Polish zlotys are equal to a British pound?

What is the total dollar amount of interest : What is the total dollar amount of interest that you received from your bond investment over the three-year period?

Find gains-losses for different mixes of mutual fund-futures : Find how many futures contracts the investor should enter into, if any. Find the gains/losses for different mixes of mutual fund and futures.

User Account

All Pages