There is a probability of 25 percent that the economy will boom; otherwise, it will be normal. Stock A is expected to return 18 percent in a boom and 9 percent otherwise. Stock B is expected to return 9 percent in a boom and 5 percent otherwise. What is the standard deviation of a portfolio that is invested 40 percent in Stock A and 60 percent in Stock B? Clarity Homes stock has a beta of 1.46. The risk-free rate of return is 3.07 percent and the market rate of return is 11.81 percent. What is the amount of the risk premium on the stock?
There is a probability of 25 percent that the economy will boom; otherwise, it will be normal. Stock A is expected to return 18 percent in a boom and 9 percent otherwise. Stock B is expected to return 9 percent in a boom and 5 percent otherwise. What is the standard deviation of a portfolio that is invested 40 percent in Stock A and 60 percent in Stock B? Clarity Homes stock has a beta of 1.46. The risk-free rate of return is 3.07 percent and the market rate of return is 11.81 percent. What is the amount of the risk premium on the stock?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 14P
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