Question 1: The rate on Treasury bills is 4 percent, and the equity risk premium is 10 percent. Use the SML to estimate the return on each of the above stocks.
Security Standard deviation Correlation with market
A 0.30 0.70
B 0.75 0.30
C 0.45 0.50
D 0.50 0.16
Question Maria has decided to invest $5,000 in each of the above stocks. Compute the expected return on the portfolio and the portfolio beta.
Security Standard deviation Correlation with market
A 0.30 0.70
B 0.75 0.30
C 0.45 0.50
D 0.50 0.16