Question: 1 Question 1 (4 Marks) 2 Richard must decide how to allocate the capital in his portfolio. 3 Richard has $93,000 available to invest. He

invest. He finds the ratesc 4 return for four stocks for the

1 Question 1 (4 Marks) 2 Richard must decide how to allocate the capital in his portfolio. 3 Richard has $93,000 available to invest. He finds the ratesc 4 return for four stocks for the past 12 years and the results are giv 5 below. Richard plans to invest 25% of his funds in each stock. 7 a) How much will he invest in each stock? 8 (1 Mark) 9 b) The expected return of Richard's porfolio is: 10 (2 Marks)(Round your answer to one one-hundreth of a percent) 11 c) The standard deviation of Richard's portfolio return is: 12 (1 tark)(Round your answer to one one-hundredth of a percent) 13 2.140 14 Year Stock A (%) Stock B (%) Stock C (%) Stock D (%) 15 1 -10.630 -17.470 -17.290 17.474 29.370 -2.544 29.550 15.038 25.310 -2.138 25.490 11.438 19.310 -1.538 19.490 19 5 -17.830 -29.470 3.340 -29.290 19.814 33.270 -2.934 33.450 21 7 13.394 22.570 -1.864 22.750 15.950 26.830 -2.290 27.010 14.810 24.930 -2.100 25.110 18.674 31.370 -2.744 31.550 -5.326 -8.630 1.256 -8.450 -8.230 -13.470 1.740 -13.290 OR AWN COP 1 0 lighten Font Format Painter lipboard AB C D E F G H Question 2 (3 Marks) nna is a Vice President at the J Corporation. The company is considering mvesting in a new factory and Anna must decide whether it is a feasible project. In order to assess the viability of the project, Anna must first calculate the rate of return that equity holders expect from the company stock. The annual returns for J Corp. and for a market index are given below. Currently, the risk-free rate of return is 1.4% and the market risk-premium is (%) a) What is the beta of J Corp.'s stock? (1 Mark)(Round your answer to two decimal places) b) Using the CAPM model, what is the expected rate of return on J Corp. sto 1 the coming year? 2 (2 Marks)(Round your answer to one one-hundreth of a percent) J Corp. Market Return Return 13 Year (%) -18.93 -9.10 27.91 14.32 16 3 23.85 12.29 17.85 9.29 -30.93 -15.10 31.81 16.27 21.11 10.92 25.37 13.05 23.47 12.10 29.91 15.32 -10.09 -4.68 - 25 12 -14.93 -7.10 Title Page Question 1 Question 2 Question 3 Question 4 Question 5 READY SI A B C Question 5 (5 Marks) Refer to Questions 1 and 2. Richard has just received an unexpected bonus at work worth $23,250 and, given the J. Corp.'s reputation for excellent investment decision making, he will invest all of the bonus in J Corp. stock. Given the rates of return for stocks A, B, C, and D presented in Question 1 and the rates of return for J Corp. stock and the market presented in Question 2, as well as the cash amounts he is investing in stocks A, B, C, and D as you determined in Question 1, Enter Answe a) What is the beta of Richard's portfolio? (3 Marks) (round to two decimal points) b) Richard's portfolio is... (2 Mark) Aggressive Defensive Neither yes

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