Question 1- Security A has an expected return of 7 percent a standard deviation of returns of 35 percent, a correlation coefficient with the market of -0.3, and a beta coefficient of -1.5. Security B has an expected return of 12 percent, a standard deviation of returns of 10 percent, a correlation with the market of 0.7, and a beta coefficient of 1.0. Which security is riskier? Why?.
Question 2- An individual has $35,000 invested in a stock which has a beta of 0.8 and $40,000 invested in stock with a beta of 1.4. If these are the only two investment in her portfolio, what is her portfolio's beta?
Question 3- Assume that the risk -free rate is 5 percent and the market risk premium is 6 percent. What is the expected return for the overall stock market? what is the required rate of return on a stock that has a beta of 1.2?