Please answer these

Risk and Return Assignment (20 points) 1. An investor purchases a stock for $50 and over the next year, receives a $0.75 dividend. At the end of the year, the stock is priced at $53. In the second year, the stock pays a $1.00 dividend and at the end of the year the stock is priced at $51. a. Compute the dollar return for each year. b. Compute the percentage return for each year. Use the returns for the 3 assets below to answer the following questions. o [ szl oo o s o[ Do 0 oo 5 2. Calculate the average return per period, the geometric (compounded) mean return, and the standard deviation of returns for each of the three assets. 3. Using your calculations in #2, compute the coefficient of variation for each of the three assets. Based on the coefficient of variation and the information in #2, which asset would you choose to invest in? Why? 4, Compute the average returns and standard deviation of the following portfolios over the 11 periods: a. Portfolio 1: Invested equally in Asset 1 and Asset 2 b. Portfolio 2: Invested equally in Asset 1 and Asset 3 c. Portfolio 3: Invested equally in Asset 1, Asset 2, and Asset 3 d. In which one of the portfolios would you prefer to invest? Why? 5. An investor wants to invest to earn a return of 12%. She evaluates a stock with a beta of 1.3. The current risk-free rate is 4% and the expected return on the market is 10%. Should she invest in the stock? Why or why not? 6. The market risk premium for a stock is 7% and a stock has a beta of 0.8. What is the rate of return of the stock if the risk-free rate 1s 2%? 7. An investor requires an 11% rate of return. A stock has a beta of 1.5 and the risk-free rate is 3%. What is the necessary market risk premium to achieve the required rate of return? What would the expected market return be