Textbook Problems: Problem 8-1 (ignore Sharpe ratio); problem 8-2; problem 8-3; and problem 8-7 Additional Problems:...
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Textbook Problems: Problem 8-1 (ignore Sharpe ratio); problem 8-2; problem 8-3; and problem 8-7 Additional Problems: Problem 1: I You invest in a portfolio of stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .75, -1.2, .90, 1.3, 1.5. The risk free return is 4% and the market return is 9%. A. Compute the beta of the portfolio B. Compute the required return of the portfolio Problem 2: You are given the following probability distribution for a stock: Pr. Outcome .4 -4% .6 12% A. Compute the expected return B. Compute the standard deviation C. Presuming the stock returns are normally distributed, what do these results indicate? Problem 3: A stock has a beta of 0.8. The market return is 14% and the risk free return is 3%. Compute the required return for this stock. Textbook Problems: Problem 8-1 (ignore Sharpe ratio); problem 8-2; problem 8-3; and problem 8-7 Additional Problems: Problem 1: I You invest in a portfolio of stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .75, -1.2, .90, 1.3, 1.5. The risk free return is 4% and the market return is 9%. A. Compute the beta of the portfolio B. Compute the required return of the portfolio Problem 2: You are given the following probability distribution for a stock: Pr. Outcome .4 -4% .6 12% A. Compute the expected return B. Compute the standard deviation C. Presuming the stock returns are normally distributed, what do these results indicate? Problem 3: A stock has a beta of 0.8. The market return is 14% and the risk free return is 3%. Compute the required return for this stock.
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