Question: Stock B D E Beta ? 1.82 1.52 O = The Market Expected return and standard deviation are as per the below: E(RM) = 7%

Stock B D E Beta ? 1.82 1.52 O = The

Stock B D E Beta ? 1.82 1.52 O = 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% Stock B has a standard deviation (GB) equal to 48%. a) The correlation between stock B returns and the market returns is equal to 0.58. I. What should be Stock B beta? (2 pts) II. What should be Stock B expected rate of return? (2 pts) b) Stock D sells for $80 today. It will pay a dividend of $D1 per share at the end of the year. Investors expect the stock to sell for $85 at the end of the year. What do investors expect the stock dividend to be by the end of the year? (2 pts) c) A share of stock E sells for $70 today. It will pay a dividend of $4 per share at the end of the year. Investors expect the stock to sell for $S, at the end of the year. What do investors expect the stock to sell for at the end of the year? (2 pts) d) Suppose you want to form a zero market-risk portfolio out of stock D and E. What should be the weight you allocate to stock D and stock E to construct the zero market-risk portfolio? (4 pts) a Stock B D E Beta ? 1.82 1.52 O = 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% Stock B has a standard deviation (GB) equal to 48%. a) The correlation between stock B returns and the market returns is equal to 0.58. I. What should be Stock B beta? (2 pts) II. What should be Stock B expected rate of return? (2 pts) b) Stock D sells for $80 today. It will pay a dividend of $D1 per share at the end of the year. Investors expect the stock to sell for $85 at the end of the year. What do investors expect the stock dividend to be by the end of the year? (2 pts) c) A share of stock E sells for $70 today. It will pay a dividend of $4 per share at the end of the year. Investors expect the stock to sell for $S, at the end of the year. What do investors expect the stock to sell for at the end of the year? (2 pts) d) Suppose you want to form a zero market-risk portfolio out of stock D and E. What should be the weight you allocate to stock D and stock E to construct the zero market-risk portfolio? (4 pts) a

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