Question: Given the following information: Expected return for the market 13% Standard deviation of market return 21% Risk free rate 5% Standard deviation of stock A

Given the following information:

Expected return for the market 13%

Standard deviation of market return 21%

Risk free rate 5%

Standard deviation of stock A 25%

Standard deviation of stock B 30%

Correlation between stock A and market is 0.8

Correlation between stock B and market is 0.6

i) Calculate the beta of stock A and stock B (3)

ii) Calculate the required rate of return for each stock (3)

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