1-Suppose you are an average risk-averse investor who can purchase only one of the folowing stocks. which should you pur...

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MGT 101 - Suppose you are an average risk-averse investor who can purchase

April 14, 2018

1-Suppose you are an average risk-averse investor who can purchase only one of the folowing stocks. which should you purchase? Explain your reasoning.

investment

expected return

standard deviation

Stock M

6%

4%

Stock N

18%

12%

Stock O

12%

7%

2-Rebecca invested $9,000 in a stock that has an expected return equal to 18 percent and $21,000 in a stock with an 8 percent expected return. what is the portfolio`s expected return?

3-Currently, the risk-free return is 3 percent, and the expected market rate of return is 9 percent. What is the expected return of the following three stock portfolio?

Amount invested

Beta

$350,000

1

$250,000

.2

$400,000

2.5

4-Compute the (a) expected return and (b) standard deviation of the following investments:

Probability rabc r Rst

0.1 22.0% -2.0%

0.6 12.0 12.0

0.3 2.0 30.0

(c) Suppose you form a portofolio that consists of 60 percent investment RST. Compute the expected returnand standard deviation of the portofolio.










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