PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 7, Problem 11PS
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To discuss: The reason why investment L is safer for diversified investor.
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Betas and risk rankings Personal Finance Problem You are considering three stocks -A, B, and C- for possible inclusion in your investment portfolio. Stock A has a beta of 1.2,
stock B has a beta of 1.5, and stock C has a beta of - 0.2.
a. Rank these stocks from the most risky to the least risky.
b. If you believed that the stock market was getting ready to experience a significant decline, which stock should you add to your portfolio?
c. If you anticipated a major stock market rally, which stock would you add to your portfolio?
a. Which stock is the most risky one? (Select the best answer below.)
O A. Stock A
O B. Stock B
O C. Stock C
Which stock is the least risky one? (Select the best answer below.)
O A. Stock B
O B. Stock A
O C. Stock C
b. If you felt that the stock market was getting ready to experience a significant decline, which stock should you add to your portfolio? (Select the best answer below.)
b. If you felt that the stock market was getting ready to experience a…
Chapter 7 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 7 - Rate of return The level of the Syldavia market...Ch. 7 - Real versus nominal returns The Costaguana stock...Ch. 7 - Arithmetic average and compound returns Integrated...Ch. 7 - Risk premiums Here are inflation rates and U.S....Ch. 7 - Risk Premium Suppose that in year 2030, investors...Ch. 7 - Stocks vs. bonds Each of the following statements...Ch. 7 - Expected return and standard deviation A game of...Ch. 7 - Standard deviation of returns The following table...Ch. 7 - Average returns and standard deviation During the...Ch. 7 - Prob. 10PS
Ch. 7 - Prob. 11PSCh. 7 - Diversification Here are the percentage returns on...Ch. 7 - Risk and diversification In which of the following...Ch. 7 - Prob. 14PSCh. 7 - Portfolio risk To calculate the variance of a...Ch. 7 - Portfolio risk a) How many variance terms and how...Ch. 7 - Portfolio risk Table 7.8 shows standard deviations...Ch. 7 - Portfolio risk Hyacinth Macaw invests 60% of her...Ch. 7 - Stock betas What is the beta of each of the stocks...Ch. 7 - Stock betas There are few, if any, real companies...Ch. 7 - Portfolio betas A portfolio contains equal...Ch. 7 - Portfolio betas Suppose the standard deviation of...Ch. 7 - Portfolio risk Here are some historical data on...Ch. 7 - Portfolio risk Suppose that Treasury bills offer a...
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