Lana formed a portfolio by investing $800,000 equally across stocks A, B, C, and D respectively...

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Lana formed a portfolio by investing $800,000 equally across stocks A, B, C, and D respectively ($200,000 in each stock). Stock Beta E(R) Je 28% 38% ? 68% A B C D 0.35 0.77 1.38 ?? ? ? ? 12.5% ● The Market Expected return and standard deviation are as per the below: E(RM) = 7% and OM = 15% ● The Risk-Free rate is equal to 2.25% a) What should be the expected return on stock A, B, and C? (6 pts) b) What should be the Beta of security D? (2 pts) c) Calculate the standard deviation (o) for stock A, B, and D. (6 pts) d) Calculate the firm specific variance oc for stock C, if stock C standard deviation (oc) is equal to 44%. (2 pts) e) What should be the Beta of Lana's portfolio? (2 pts) f) What should be the expected return on Lana's portfolio? (2 pts) g) What should be the market risk of Lana's portfolio? (2 pts) Lana formed a portfolio by investing $800,000 equally across stocks A, B, C, and D respectively ($200,000 in each stock). Stock Beta E(R) Je 28% 38% ? 68% A B C D 0.35 0.77 1.38 ?? ? ? ? 12.5% ● The Market Expected return and standard deviation are as per the below: E(RM) = 7% and OM = 15% ● The Risk-Free rate is equal to 2.25% a) What should be the expected return on stock A, B, and C? (6 pts) b) What should be the Beta of security D? (2 pts) c) Calculate the standard deviation (o) for stock A, B, and D. (6 pts) d) Calculate the firm specific variance oc for stock C, if stock C standard deviation (oc) is equal to 44%. (2 pts) e) What should be the Beta of Lana's portfolio? (2 pts) f) What should be the expected return on Lana's portfolio? (2 pts) g) What should be the market risk of Lana's portfolio? (2 pts)

Answer rating: 100% (QA)

To solve the given questions we need to use the Capital Asset Pricing Model CAPM According to CAPM the expected return of a stock is calculated using ... View the full answer