finance problem need to be done fast

Mar 3rd, 2015
Business Finance
Price: $10 USD

Question description

Consider the following two stocks. The risk-free rate is 4% and the average stock's risk premium is 8%.

   Stock A  Stock B

Beta  1.2  0.7

Standard deviation  11%  15% 

a) When you hold a well-diversified portfolio, what stock should you choose to reduce the risk? You should explain.

b) If you construct a portfolio that consists of Stock A and Stock B (only two stocks), find the required rate of return on your portfolio.

c) If the expected return on Stock A is 12%, is it good to invest in this stock? You should show your work and explain. 

Tutor Answer

(Top Tutor) Essaysimplified01
School: UT Austin

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