Business, 05.08.2020 17:01 rodfam13716
Gretta's portfolio consists of $700,000 invested in a stock that has a beta of 1.2 and $300,000 invested in a stock that has a beta of 0.8. The risk-free rate is 6% and the market risk premium is 5%. Which of the following statements is CORRECT?
a. The required return on the market is 10%.
b. The portfolio's required return is less than 11%.
c. If the risk-free rate remains unchanged but the market risk premium increases by 2%, Gretta's portfolio's required return will increase by more than 2%.
d. If the market risk premium remains unchanged but expected inflation increases by 2%, Gretta's portfolio's required return will increase by more than 2%.
e. If the stock market is efficient, Gretta's portfolio's expected return should equal.
Answers: 1
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Stock a has a beta of 1.2 and a standard deviation of 20%. stock b has a beta of 0.8 and a standard deviation of 25%. portfolio p has $200,000 consisting of $100,000 invested in stock a and $100,000 in stock b. which of the following statements is correct? (assume that the stocks are in equilibrium.) (a) stock b has a higher required rate of return than stock a. (b) portfolio p has a standard deviation of 22.5%. (c) portfolio p has a beta equal to 1.0. (d) more information is needed to determine the portfolio's beta. (e) stock a's returns are less highly correlated with the returns on most other stocks than are b's returns.
Answers: 3
Gretta's portfolio consists of $700,000 invested in a stock that has a beta of 1.2 and $300,000 inve...
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