# Question

The following three stocks are available in the market:

Assume the market model is valid.

a. Write the market model equation for each stock.

b. What is the return on a portfolio with weights of 30 percent Stock A, 45 percent Stock B, and 25 percent Stock C?

c. Suppose the return on the market is 15 percent and there are no unsystematic surprises in the returns. What is the return on each stock? What is the return on theportfolio?

Assume the market model is valid.

a. Write the market model equation for each stock.

b. What is the return on a portfolio with weights of 30 percent Stock A, 45 percent Stock B, and 25 percent Stock C?

c. Suppose the return on the market is 15 percent and there are no unsystematic surprises in the returns. What is the return on each stock? What is the return on theportfolio?

## Answer to relevant Questions

You are forming an equally weighted portfolio of stocks. Many stocks have the same beta of .84 for Factor 1 and the same beta of 1.69 for Factor 2. All stocks also have the same expected return of 11 percent. Assume a ...Consider a levered firm’s projects that have similar risks to the firm as a whole. Is the discount rate for the projects higher or lower than the rate computed using the security market line? Why? Given the following information for Huntington Power Co., find the WACC. Assume the company’s tax rate is 35 percent. Debt: 5,000 6 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 105 ...Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times ...Imagine that a particular macroeconomic variable that influences your firm’s net earnings is positively serially correlated. Assume market efficiency. Would you expect price changes in your stock to be serially correlated? ...Post your question

0