The expected return on MSFT next year is 12% with a standarddeviation of 20%. The expected return on AAPL next year is 24% witha standard deviation of 30%. If James makes equal investments inMSFT and AAPL(which means the weights are 0.5 for both) what is theexpected return on his portfolio.

a.

20%

b.

16%

c.

18.5%

d.

25%

Determine the standard deviation of the following portfolioconsisting of two stocks that have a correlation coefficient of.75.

Portfolio Weight ExpectedReturn Standard Deviation

Apple 0.5 0.14 0.2

Coca-Cola 0.5 0.14 0.2

a.

25%

b.

11%

c.

17%

d.

18.7%

You are considering investing in a project with the followingpossible outcomes:

Probability Rate of Return

Economicboom 15% 10%

Economicgrowth 45% 8%

Economicdecline 25% 5%

Depression 15% -3%

Calculate the expected rate of return for this investment.

a.

6.8%

b.

7.0%

c.

5.9%

d.

6.3%

Use the following information to answer the followingquestion(s).

Calculate the standard deviation for the following:

Probability Rate of Return

Economicboom 15% 10%

Economicgrowth 45% 8%

Economicdecline 25% 5%

Depression 15% -3%

a.

-2.33%

b.

.59%

c.

4.16%

d.

4.88%

What will be the expected rate of return on AAPL stock with abeta of 1.49 if the risk-free rate of interest is 2% and if themarket risk premium, which is the difference between expectedreturn on the market portfolio and the risk-free rate of return isestimated to be 8%?

a.

25%

b.

13.92%

c.

2%

d.

13%

Answer rating: 100% (QA)

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