22 Jul WHICH STOCK SHOULD BE HELD?
The expected return and beta of a portfol Show more Consider the following data for stocks A and B: 16. The expected return and beta of a portfolio constructed by investing 1/3 of your funds in stock A and 2/3 in stock B is: a. RP = 16%; bP = 1.1 b. RP = 14%; bP = 0.9 c. RP = 12%; bP = 0.8 d. Not enough information to calculate e. None of the above. 17. The variance of a portfolio constructed by investing 1/3 of your funds in stock A and 2/3 in stock B is: a. s 2 P =9.4% b. s 2 P =11.7% c. s 2 P =14.8% d. Not enough information to calculate e. None of the above. 18. If the riskless rate of return were 5% what percentage of money invested in risky stocks should an investor place in each stock (assuming A and B are the only risky assets available)? a. XA = 30%; XB = 70% b. XA = 45%; XB = 55% c. XA = 70%; XB = 30% d. Not enough information to calculate e. None of the above. 19. If the security market line describes equilibrium and stocks A and B are in equilibrium what is the return on the market portfolio and the riskless rate of interest? a. RP = 11.25%; RF = 3.25% b. RP = 14.5%; RF = 3.25% c. RP = 17.7%; RF = 2.50% d. Not enough information to determine e. None of the above. 20. If an investor can lend and borrow at the riskless rate determined in part c but is restricted to holding only one of the two risky stocks in this problem Which stock should be held? a. Stock A b. Stock B c. Not enough information to determine PLEASE EXPLAIN Show less
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