Rank the following three stocks by their total risk level, highest to lowest. Night Ryder has an average return of 12 percent and a standard deviation of 33 percent. The average return and standard deviation of WholeMart are 13 percent and 40 percent, and Fruit Fly is 18 percent and 35 percent.   Rank Stock 1   2   3

Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 6.95%   15%   0.7 B 8.35      15      1.1 C 10.45      15      1.7 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 4.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) What is the market risk premium (rM - rRF)? Round your answer to one decimal place.   % What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.   What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.   % What would you expect the standard deviation of Fund P to be?   Less than 15% Greater than 15% Equal to 15%

Below are standard deviations of four stocks: M, N, O and P.  Stock M N O P Standard deviation 12% 20% 15% 30% 1. Which stock is the riskest?                                                            2. Based on the risk-return tradeoff, which stock should provide the highest  3. If stock O provides a higher return than stock P, what should happen?

1. The following table presents the expected returns of three stocks and the risk free rate. в 4% Stock A 8% Expected return What is the expected return and risk on an equally weighted portfolio composed of these four assets? The standard deviation of stock A is 10% and the covariance between A and B equals 0.0045. The correlation matrix between A, B and C is: 14% 4% Correl B A 1 0.3 0.7 B 0.3 0.5 0.5 Combining stocks A and C in a portfolio in equal proportions will result in a variance of 1.95%. 0.7