eBook Expected Returns: Discrete Distribution 1) The market and Stock J have the following probability distributions: Probability
Question:
eBook
Expected Returns: Discrete Distribution
1) The market and Stock J have the following probability distributions:
Probability rM rJ
0.3 13%1 9%
0.4 9 6
0.3 18 13
Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place.
- Expected rate of return (Market):%
- Expected rate of return (Stock J):%
Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places.
- Standard deviation (Market):%
- Standard deviation (Stock J):%
2)Your retirement fund consists of a $7,000 investment in each of 18 different common stocks. The portfolio's beta is 1.10. Suppose you sell one of the stocks with a beta of 0.8 for $7,000 and use the proceeds to buy another stock whose beta is 1.6. Calculate your portfolio's new beta. Do not round intermediate calculations. Round your answer to two decimal places.