B 2 Ms. Kay Brillant, an investment manager, is using the CAPM to recommend stocks to...
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B 2 Ms. Kay Brillant, an investment manager, is using the CAPM to recommend stocks to her clients. She has obtained the following data from a market research firm: Name Theta Sigma Market Index Risk Free Rate A Forecasted Standard Return Deviation Beta 12% 36% 0.6 14% 25% 1.3 12% 15% 1.0 3% Calculate expected return and alpha for each stock. 4 Identify and explain which stock would be more appropriate for an investor who wants to: i) Add this stock to a well-diversified equity portfolio. ii) Hold this stock as a single stock portfolio. 4 4 B 2 Ms. Kay Brillant, an investment manager, is using the CAPM to recommend stocks to her clients. She has obtained the following data from a market research firm: Name Theta Sigma Market Index Risk Free Rate A Forecasted Standard Return Deviation Beta 12% 36% 0.6 14% 25% 1.3 12% 15% 1.0 3% Calculate expected return and alpha for each stock. 4 Identify and explain which stock would be more appropriate for an investor who wants to: i) Add this stock to a well-diversified equity portfolio. ii) Hold this stock as a single stock portfolio. 4 4
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