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an investor is evaluating the common shares od the three firms A,B and C. Expected returns,...

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Finance

an investor is evaluating the common shares od the three firmsA,B and C. Expected returns, standard deviation of returns , andbetas are :

stock    expected return    standarddeviation    beta weight

A 10% 8% 1.4 20%

B 15% 12% 1.2 50%

C 20% 13% 1.8 30%

a) What is the expected return of the portfolio ?

b) What is Beta of the portfolio ?

c) Assume the risk free rate of interest is 6% and the requiredon the market portfolio is 13%. Using the capital asset pricingmodel, what is the required return on stock A ?

Answer & Explanation Solved by verified expert
3.7 Ratings (510 Votes)
Stock Expected return Standard deviation Beta Weight A 10 8 14 20 B 15 12 12 50 C 20 13 18 30 Weight of stock A WA 20 Expected return on stock A ERA 10    See Answer
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an investor is evaluating the common shares od the three firmsA,B and C. Expected returns, standard deviation of returns , andbetas are :stock    expected return    standarddeviation    beta weightA 10% 8% 1.4 20%B 15% 12% 1.2 50%C 20% 13% 1.8 30%a) What is the expected return of the portfolio ?b) What is Beta of the portfolio ?c) Assume the risk free rate of interest is 6% and the requiredon the market portfolio is 13%. Using the capital asset pricingmodel, what is the required return on stock A ?

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