Allocation of dollars among the three stocks


For questions below, consider the following information for the BU Scholarship Investment Fund. The total investment in the fund is $1 million.

STOCK INVESTMENT BETA EXPECTED RETURN

A $200,000 1.5 25%
B $300,000 -0.5 4%
C $500,000 1.25 15%

Question 1: Based on the allocation of dollars among the three stocks and their expected return, calculate the expected rate of return for the BU Scholarship Investment Fund.

a. 14.67%
b. 18.8
c. 13.7
d. 44.0
e. Insufficient information to compute

Question 2: Based on the allocation of dollars among the three stocks and their respective betas, calculate the beta for the BU Scholarship Investment Fund.

a. 3.25
b. 1.08
c. 2.25
d. 0.75
e. 0.775
f. Insufficient information to compute. (if using bubble sheet, just write "f" in to select f)

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Finance Basics: Allocation of dollars among the three stocks
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