1. Business
  2. Finance
  3. answer the following questions 1 security a has an expected...

Question: answer the following questions 1 security a has an expected...

Question details

Answer the following questions:

1. Security A has an expected rate of return of 6%, a standard deviation of returns of 30%, a correlation coefficient with the market of 0.25, and a beta coefficient of 0.5. Security B has an expected return of 11%, a standard deviation of returns of 10%, a correlation with the market of 0.75, and a beta coefficient of 0.5. Which security is riskier? Why?

2. The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 20%. If the correlation between Stock A and the market is 0.70, then what is Stock A’s beta?

3. An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk- free rate is 6%, the expected return on the first factor r1 is 12%, and the expected return on the second factor r2 is 8%. If bi1 0 7 and bi2 0 9, what is Crisp’s required return?

4. Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. What are the expected return and standard deviation of a portfolio invested 30% in Stock A and 70% in Stock B?

Your paper should meet the following requirements: Be approximately 2 pages in length, not including the cover page and reference page.

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution