DEVRY BUSN 379 Week 5 Homework - Latest
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WEEK 5
Chapter 11:
4, 7, 17, and 29
Problem 4
Portfolio
Expected Return. You have $10,000 to invest in a stock portfolio. Your choices
are Stock X with an expected return of 14 percent and Stock Y with an expected
return of 11 percent. If your goal is to create a portfolio with an expected
return of 12.4 percent, how much money will you invest in Stock X? In Stock Y?
Problem 7
7.
Calculating Returns and Standard Deviations. Based on the following
information, calculate the expected return and standard deviation for the two
stocks.
Problem 17
Using CAPM. A
stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free
asset currently earns 3.8 percent.
a. What is
the expected return on a portfolio that is equally invested in the two assets?
b. If a
portfolio of the two assets has a beta of .7, what are the portfolio weights?
c. If a
portfolio of the two assets has an expected return of 9 percent, what is its
beta?
d. If a
portfolio of the two assets has a beta of 2.3, what are the portfolio weights?
How do you interpret the weights for the two assets in this case? Explain.
Problem 29
29.
SMLSuppose you observe the following situation:
a. Calculate
the expected return on each stock.
b. Assuming
the capital asset pricing model holds and stock A’s beta is greater than stock
B’s beta by .25, what is the expected market risk premiu
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