3. An investor has a stock portfolio. Each stock (listed bel

3. An investor has a stock portfolio. Each stock (listed below) in the portfolio has the following market values and betas.

Stock Market Value Beta
Coca-Cola $8,085 0.89
Cisco Systems $1,900 1.1
AT&T $12,900 0.60
Northrop Grumman $6,000 1.2

What can an investor expect from this portfolio?
a. This portfolio will have higher levels of volatility than the market.
b. The portfolio's unsystematic risk is measured through beta which is 0.84.
c. This portfolio has less systematic risk than the market.
d. This portfolio has less money invested in low beta stocks and more money invested in high beta stocks.

4. A stock has the same level of systematic risk as the market. The stock has an expected return of 14%. The risk free rate is 5%. Calculate the market risk premium.
a. 5%
b. 7%
c. 9%
d. 14%

5. The stocks of Microsoft and Apple have a correlation of 0.6. Microsoft and Apple stock have variances of 30% and 40%. What is their covariance?

A highly risk-averse investor is considering adding one additional stock to a 4-stockportfolio. Two stocks are under consideration. Both have an expected return of 15%. However, the distribution of possible returns associated with Stock A has a standard deviation of 12%, while Stock B's standard deviation is 8%. Both stocks

Stocks M and W have the following historical returns:
Year Stock M Stock W
2007 -19% -13.50%
2008 33% 22.75%
2009 16% 34.50%
2010 -0.30% -7.83%
2011 27% 23.30%
a. Calculate the average rate of return for eachstock during the 5-year period.
b. Assume

Suppose you have invested $30,000 in the following four stocks:
Security Amount Invested Beta
Stock A $5,000 0.75
Stock B $10,000 1.1
Stock C $8,000 1.36
Stock D $7,000

Stock A and B have the following historical returns:
YEAR STOCK A'S RETURNS STOCK B'S RETURNS
1998 (18.00%) (14.50%)
1999 33.00% 21.80%
2000 15.00% 30.50%
2001 (0.50%) (7.60%)
2002 27.00% 26.30%
a)Calculate the average rate of return for eachstock during the period 1998 through 2002.
b)Assume that an investor held a

Stocks A and B both have an expected return of 10% and a standard deviation of returns of 25%. Stock A has a beta of 0.8 and Stock B has a beta of 1.2. The correlation coefficient, r, between the two stocks is 0.6. Portfolio P is a portfolio with 50% invested in Stock A and 50% invested in B. Which of the following statements is

Once you become even more finance savvy, over time you will be more comfortable randomly choosing stock on your own or by using a scientific approach. Can you as an individual investor choosing your own stock create an optimal portfolio of 99 stock (can be other securities besides stock) by selecting 33 stocks with beta equal to

6) There are two stocks in the market, stock A and stock B. The price of stock A today is $75. The price of stock A next year will be $63 if the economy is in a recession, $83 if the economy is normal, and $96 if the economy is expanding. The probabilities of recession, normal times, and expansion are .2, .6, and .2 respectively

Please help with the attached problem.
Thank you.
Stocks A and B have the following historical returns:
Year Stock A's Returns, Stock B's Returns
2001 -18.00% -14.50%
2002 33.00 21.80
2003 15.00 30.50
2004 0.50 (7.60)
2005 27.00 26.30
a. Calculate the average rate of r

The correlation between stocks A and B is 0.50, while the correlation between stocks A and C is -0.5. You already own stock A and are thinking of buying either stock B or stock C. If you want your portfolio to have the lowest possible risk, would you buy stock B or C? Would you expect the stock you choose to affect the return th