Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. consider the following information for stocks a, b

Consider the following information for stocks A, B, and C. The returns on the three...

50.1K

Verified Solution

Question

Finance

Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.)

Stock Expected Return Standard Deviation Beta
A 9.65% 16% 0.7
B 11.45 16 1.1
C 14.15 16 1.7

Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.)

A: What is the market risk premium (rM - rRF)? Round your answer to one decimal place.

%

B: What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.

C: What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.

%

D: What would you expect the standard deviation of Fund P to be?

1:Less than 16%

2:Greater than 16%

3:Equal to 16%

-Select-1,2,3

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Accounting
1.2K views

Big Box Retailer began business during 2017, and decided to usethe Dollar-Value LIFO Method...

Advance Math
1.2K views

In each case below either show that the statement is True or give an example showing...

Operations Management
1.2K views

The XYZ Company plans to allocate some or all of its monthly advertising budget of $75,000...

Electrical Engineering
1.2K views

What is Advantages of Pyramidal Horn Antenna and Parabolic Dish Antenna

Accounting
1.2K views

Alton Inc. is working at full production capacity producing 26,000 units of a unique product. Manufacturing...

Accounting
1.2K views

Cheyenne Corporation sold $2,300,000, 6%, 5-year bonds on January 1, 2022. The bonds were dated...

Accounting
1.2K views

The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for...

Accounting
1.2K views

In class Practice1. Acme has the following information about its inventory.Units Unit Cost BalanceBeginninginventory- May...

Accounting
1.2K views

A company receives a 10%, 90-day note for $5,100. The total interest due on the...

Accounting
1.2K views

We know a car can be had for 60 monthly payments of $399. The dealer...

Accounting
1.2K views

how to calculate: LONG TERM SOLVENCY RISK Liabilities to shareholders equity ratio Interest...

Accounting
1.2K views

Complete this question by entering your answers in the tabs below. 3. With respect to...