Risk and Return

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ANALYZING A PORTFOLIO a 58. You want your portfolio beta to be 1.20. Currently, your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of .6. You have another $400 to invest and want to divide it between an asset with a beta of 1.6 and a risk-free asset. How much should you invest in the risk-free asset? a. $0 b. $140 c. $200 d. $320 e. $400 ANALYZING A PORTFOLIO d 59. You have a $1,000 portfolio which is invested in stocks A and B plus a risk-free asset. $400 is invested in stock A. Stock A has a beta of 1.3 and stock B has a beta of .7. How much needs to be invested in stock B if you want a portfolio beta of .90? a. $0 b. $268 c. $482 d. $543 e. $600…show more content…
The probability of a recession is 15 percent. There is a 30 percent chance of a boom economy. The remainder of the time the economy will be at normal levels. What is the standard deviation of the returns on Kurt’s Adventures, Inc. stock? a. 10.05 percent b. 12.60 percent c. 15.83 percent d. 17.46 percent e. 25.04 percent STANDARD DEVIATION d 67. What is the standard deviation of the returns on a stock given the following information? State of Probability of Rate of Return Economy State of Economy if State Occurs Boom 10% 16% Normal 60% 11% Recession 30% -8% a. 5.80 percent b. 7.34 percent c. 8.38 percent d. 9.15 percent e. 9.87 percent PORTFOLIO WEIGHT d 68. You have a portfolio consisting solely of stock A and stock B. The portfolio has an expected return of 10.2 percent. Stock A has an expected return of 12 percent while stock B is expected to return 7 percent. What is the portfolio weight of stock A? a. 46 percent b. 54 percent c. 58 percent d. 64 percent e. 70 percent PORTFOLIO WEIGHT e 69. You own the following portfolio of stocks. What is the portfolio weight of stock C? Number

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