Please respond with a paragraph to each question
Stock A has a beta of 0.80, stock B has a beta of 1.40, and stock C has a beta of -0.30.
Rank these stock from the riskiest to the least risky. Explain your reasoning and back up your explanation with research.
If the return on the market portfolio increases by 12%, what change in the return for each of the stocks would you expect? Explain your answer.
If the return on the market portfolio declines by 5%, what change in the return for each of the stocks would you expect? Explain your answer.
If you felt the stock market was about to experience a significant decline, which stock would you be most likely to add to your portfolio? Why?
If you anticipated a major stock market rally, which stock would you be most likely to add to your portfolio? Why?
Please respond with a paragraph to each question
Stock A has a beta of 0.80, stock B has a beta of 1.40, and stock C has a beta of -0.30.
Rank these stock from the riskiest to the least risky. Explain your reasoning and back up your explanation with research.
If the return on the market portfolio increases by 12%, what change in the return for each of the stocks would you expect? Explain your answer.
If the return on the market portfolio declines by 5%, what change in the return for each of the stocks would you expect? Explain your answer.
If you felt the stock market was about to experience a significant decline, which stock would you be most likely to add to your portfolio? Why?
If you anticipated a major stock market rally, which stock would you be most likely to add to your portfolio? Why?
Related questions
1. You own a stock portfolio invested 15 percent in Stock Q, 20 percent in Stock R, 35 percent in Stock S, and 30 percent in Stock T. The betas for these four stocks are 1.1, 0.8, 1.2, and 0.9, respectively. What is the portfolio beta? (Round your answer to 3 decimal places.)
| 2. You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.95, and the total portfolio is exactly as risky as the market, what must the beta be for the other stock in your portfolio? (Round your answer to 2 decimal places.) |
| Beta |
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| 3. A share of stock sells for $38 today. The beta of the stock is 1, and the expected return on the market is 17 percent. The stock is expected to pay a dividend of $1.10 in one year. If the risk-free rate is 3.7 percent, what should the share price be in one year? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) | ||
| Share price | $ |
| 4. A stock has a beta of 0.7 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. |
| a. | What is the expected return on a portfolio that is equally invested in the two assets? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
| Expected return | % |
| b. | If a portfolio of the two assets has a beta of 0.6, what are the portfolio weights?(Round your answers to 2 decimal places. Omit the "%" sign in your response.) |
| Weight | |
| xS | % |
| xrf | % |
| c. | If a portfolio of the two assets has an expected return of 8 percent, what is its beta? (Round your answer to 2 decimal places.) |
| Beta |
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| d. | If a portfolio of the two assets has a beta of 2.80, what are the portfolio weights? (Negative amounts should be indicated by a minus sign. Omit the "%" sign in your response.) |
| Weight | |
| xS | % |
| xrf | % |
| 5. Asset W has an expected return of 8 percent and a beta of 2. If the risk-free rate is 5.5 percent, what is the market risk premium? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
| Market risk premium | % |
| 6. Stock Y has a beta of 1.5 and an expected return of 12 percent. Stock Z has a beta of 0.8 and an expected return of 8 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
| Risk-free rate | % |
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