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Risks in Common Stocks

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Select a portfolio of common stocks in five companies whose stock is traded on the New York Stock Exchange (NYSE). Base your selection of stocks on your own personal willingness to take risks. Look up the beta of each company. Using equal weights, compute the portfolio beta, showing your work. Discuss how the portfolio beta compares to your own willingness to take risks. Discuss whether you would rather hold an individual stock or a portfolio of stocks.

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Solution Summary

A portfolio of stocks are listed on NYSE are created, depending on the willingness to take risk, and their betas are calculated.

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You are trying to set up a portfolio that consists of a corporate bond fund and a common stock fund.
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You are trying to set up a portfolio that consists of a corporate bond fund and a common stock fund. the following information about the annual return (per $1,000)of each of these investments under different economic condition is available, along with probability that each of these economic conditions will occur:
probability economic corporate common
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0.10 Recession -$30 -$150
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0.10 High growth 110 250

Compute the covariance of the corporate bond fund and the common stock fund.
(I need detail calculation and explanation.)

Suppose that you wanted to create a portfolio that consists of a corporate bond fund and a common stock fund. Compute the portfolio expected return and portfolio risk for each of the following percentages invested in a corporate bond fund:
a. 30% b. 50% c. 70%
d. on the bases of the results of (a) through (c), which portfolio would you recommended? Explain.

(I need a detail calculation and explanation for - Computation the portfolio expected return and portfolio risk for each of the following percentages invested in a corporate bond fund)

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