V Question 8As the Head of Business Development of Fidelity Venture Capital, a client has presented abusiness plan that has the following projected returns for your consideration;a.Stock AStock BState of the EconomyReturnsProbReturnsProbExcellent32%0.440%0.2Worse-5%0.48%0.3Normal21. %0.225%0.5Required:i. Calculate the expected return for each stockii. Calculate the total risk of the client's business for each stockiii. If your client plans investing equally in each stock, with a correlation coefficient of -0.8,what is the portfolio return and portfolio risk?iv. If the beta of the client's business is 0.9 and the risk free rate is 22%, calculate the requiredrate of investment if the market risk premium is 4%.Question 9

Stock A Expected return =p1 r1+p2 r2+p3r3 p=Probability and r=return Expected return…

Answered: 1. Calculate the expected retur ii.…

1. Calculate the expected retur ii. Calculate the total risk of th iii. If your client plans investir what is the portfolio return iv. If the beta of the client's bu rate of investment if the man

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 6EP

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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

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