What is the Required Return for Andy?

Is stock Andy Under Priced, Fairly Priced, or Over Priced?

What is the Required Return of Betty?

Is stock Betty Under Priced, Fairly Priced, or Over Priced?

What is the βP of your portfolio?

What is the Expected Return ERP of your portfolio?

What is the required return RRP of your portfolio?

Is your portfolio a poor, good, or fair buy given your risk exposure?

Flint: β = 1.5 σ = 30% Troy: β = 1.1 σ = 50%. Which one is a riskier stock to add to your portfolio?

Pontiac: σ = 30% ρ = -0.25 Warren: σ = 10% ρ = 0.50. Which one would be the best to add to your portfolio (assume returns are the same)?

Stock	$ Invested	Expected Return	Beta
Andy	$35,000	10.50%	0.8
Betty	$65,000	15.00%	1.3

Market: R_f = 4.00% R_M = 12.00

Answer rating: 100% (QA)

To assess the required returns pricing and risk of stocks Andy and Betty as well as the overall portfolio we can use the Capital Asset Pricing Model C... View the full answer