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    Computation of beta for and return on stocks

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    The expected standard deviation of market returns is 0.20. Sandra has the following four stocks:

    Security Standard Dev. Correlation with the Market
    A .30 .70
    B .75 .30
    C .45 .50
    D .50 .16

    Compute the beta for each stock.
    If the rate on Treasury Bills is 4%, and the equity risk preium is 10%. Use the SML to estimate the return on each of the stocks listed.

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    Solution Summary

    This posting contains procedure to compute beta for and return on stocks.