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You own a portfolio of two stocks, X and Y
You own a portfolio of two stocks, X and Y. Stock X is valued at $3,200 and has an expected return of 15 percent. Stock Y is valued at $2,600 has an expected return of 7 percent. What is the expected return on the portfolio? O 11.41% O 11% 10.59%
A stock has a beta of 0.7 and a standard deviation of 5.8 percent. The market rate of return is 10.1 percent and the U.S. Treasury bill is providing a 4.1 percent return. What is the expected return on the stock? O 8.81% O 11.17% O 8.30%
XYZ stock has a beta of 2 and a standard deviation of 8 percent. The market rate of return is 12 percent and the U.S. Treasury bill is providing a 3 percent return. What is the expected return on the stock? O 27% O 21% O 16%
Stock XY has a beta of 1.8. The market risk premium is 9 percent, the risk-free rate is 2 percent and inflation is 2.8 percent. What is the expected return on this stock? O 18.2% O 19% O 14.6%
Expert Solution
1. Correct Answer is A: 11.41%
Expected Return of Portfolio = R1W1 +R2W2
= 15* 3200/5800 + 7 *2600/ 5800
= 11.41%
2. Correct answer is C : 8.30%
Expected Return = Rf + (Rm -Rf)Beta
= 4.1 + (10.1 - 4.1)0.7
=8.3%
3. Correct answer is B : 21%
Expected Return = Rf + (Rm -Rf)Beta
= 3 + (12 - 3)2
=21%
4. Correct answer is A : 18.20%
Expected Return = Rf + (Rm -Rf)Beta
= 2 + 9*1.80
=18.2%
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