Part 1: Initial Post:

1. Review the "Risk, Return, and the Capital Asset Pricing Model" Mini-Case (pg. 237).
2. Answer question #7 only.

Q-7 Which of these two-stock portfolios do you prefer? Why?

"To the extent that there is a premium for bearing risk It is a premium for bearing the risk of doing badly in bad times See a discussion of portfolio theory short selling See a demonstration of the CAPM. Learn more about market efficiency. Mini-Case Risk, Return, and the Capital Asset Pricing Model On your first day as an intem at Tri-Star Management Incor. 5% over the next year. Also, information from an investment porated the CEO asks you to analyze the following infor advising service lists the current beta for Tech.com as 1.68 mation pertaining to two common stock investments , Tech and for Sam's Grocery as 0.52. You are provided a series of com Incorporated and Sam's Grocery Corporation. You are questions to guide your analysis. told that a one-year Treasury Bill will have a rate of retum of Economy S&P 500 Probability 30% 20% Recession Average Expansion Boom Estimated Rate of Return Tech.com Sam's Grocery - 20% 5% 15% 6% 30% 8% 50% 10% 11% 17% 27% 15% Continued