Goal is to generate a portfolio with the expected return

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Reference no: EM139402

Q. Suppose you have $20,000 total. If you put $14,000 in Stock A also remainder in Stock B, what will be the expected return on your portfolio? What will be standard deviation on your portfolio?
State of Economy Probability Return on A Return on B
Recession 0.1 -20% 30%
Normal 0.6 10% 20%
Boom 0.3 70% 50%
Assignmnet-59

1) Stock Y has a beta of 1.50 also the expected return of= 16%. Stock Z has the beta of 0.70 also the expected return of 11.5%. Market risk premium is 8%. What would risk-free rate have to be for two stocks to accurately price relative to each other?

2) A stock has beta of 0.9, expected return on the market is 10%, also the risk-free rate is 1%. What should expected return on this stock be?

3) You have= $10,000 to invest in a stock portfolio. Your choices are Stock A with the expected return of= 16% also Stock B with the expected return of= 11%. If your goal is to generate a portfolio with the expected return of 14.25%, how much money will you invest in stock A? In Stock B?

Reference no: EM139402

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