A small market consists of three stocks, A, B, and C. and their financial data and projection are presented below. Assume CAPM holds. Stock Number of shares Stock Price Beta A 750 33 1.2 B 220 51 0.8 C 460 19 1.4 Economic condition Probability A B C Boom 20% 20% 22% 23% Normal 50% 15% 10% 12% Recession 30% 2% 5% 7% Find: the expected return and standard deviation on this portfolio.
A small market consists of three stocks, A, B, and C. and their financial data and projection are presented below. Assume CAPM holds. Stock Number of shares Stock Price Beta A 750 33 1.2 B 220 51 0.8 C 460 19 1.4 Economic condition Probability A B C Boom 20% 20% 22% 23% Normal 50% 15% 10% 12% Recession 30% 2% 5% 7% Find: the expected return and standard deviation on this portfolio.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
A small market consists of three stocks, A, B, and C. and their financial data and projection are presented below. Assume
|
Stock |
Number of shares |
Stock Price |
Beta |
|
A |
750 |
33 |
1.2 |
|
B |
220 |
51 |
0.8 |
|
C |
460 |
19 |
1.4 |
|
Economic condition |
Probability |
A |
B |
C |
|
Boom |
20% |
20% |
22% |
23% |
|
Normal |
50% |
15% |
10% |
12% |
|
Recession |
30% |
2% |
5% |
7% |
Find:
the expected return and standard deviation on this portfolio.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education