Homework

1)    You have developed data which give (1) the average annual returns on the market for the past five years, and (2) similar information on Stocks A and B. In year 1, the Market Portfolio returned .03, Stock A returned .16 and Stock B returned .05. In year 2, the Market Portfolio returned -.05, Stock A returned -.20 and Stock B returned .05. In year 3, the Market Portfolio returned .01, Stock A returned .18 and Stock B returned .05. In year 4, the Market Portfolio returned -.10, Stock A returned -.25 and Stock B returned .05. In year 5, the Market Portfolio returned .06, Stock A returned .14 and Stock B returned .05. If these data are as follows, which of the possible answers best describes the historical betas for A (b A)and B (b B)?

Question 5 options:

3)    You want your portfolio beta to be 0.90. Currently, your portfolio consists of $4,000 invested in stock A with a beta of 1.47 and $3,000 in stock B with a beta of 0.54. You have another $9,000 to invest and want to divide it between an asset with a beta of 1.74 and a risk-free asset. How much should you invest in the risk-free asset? 

Question 9 options:

You have the following information about your stock portfolio. You own 6 ,000 shares of Stock A which sells for $ 14 with an expected return of 8 %. You own 2,000 shares of Stock B which sells for $10 with an expected return of 6%. You own 4,000 shares of Stock C which sells for $12 with an expected return of 9%. You own 4 ,000 shares of Stock D which sells for $ 9 with an expected return of 10 %. What is the expected return on your portfolio? Show your answer to the nearest .01%.

Your Answer:

Question 11 options: