Beta Calculations
Michael Margolis is a single parent and motivational training consultant from Palatine, Illinois. He is wondering about potential returns on investments given certain amounts of risk. Michael invested a total of $12,000 in three stocks ($4,000 in each) with different betas: stock A with a beta of 0.7, stock B with a beta of 1.8, and stock C with a beta of 2.5. If the stock market rises 8 percent over the next year, what will be the likely value of each investment? Do not round your intermediate calculations. Round your answers to the nearest dollar.
Stock A Stock B Stock C Likely value
A: B: C:
If the stock market declines 9 percent over the next year, what will be the likely value of each of Michael’s investments? Do not round your intermediate calculations. Round your answers to the nearest dollar.
Stock A Stock B Stock C Likely value
A: B: C: