a) What is the expected return for Stock A?

b) What is the standard deviation for Stock C?

c) Which of the three stocks is a rational investor most likely to purchase?

d) What is the expected return and standard deviation of a portfolio of 30 shares of Stock A, 30 shares of Stock B and 20 shares of Stock C?

e) Using graph explain Security Market Line (SML) and discuss that how based on SML investor can decide whether the certain stock is under-priced or overpriced.

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Consider the following three stocks: Probability 0.1 0.3 0.6 Olympic Medal Gold Silver Bronze Current Share Price Expected Return Standard Deviation Stock A 25% 20% 5% 4 ? 8.08% Stock B 70% 30% -15% 1.50 7% 29.09% Stock C 8% 18% 30% 2.00 24.2% ? Consider the following three stocks: Probability 0.1 0.3 0.6 Olympic Medal Gold Silver Bronze Current Share Price Expected Return Standard Deviation Stock A 25% 20% 5% 4 ? 8.08% Stock B 70% 30% -15% 1.50 7% 29.09% Stock C 8% 18% 30% 2.00 24.2% ?

Answer rating: 100% (QA)

a The expected return for Stock A is 25 b The standard deviation for Stock C is 30 c A rational investor would most likely purchase Stock C This is be... View the full answer