Stock abc has a beta of 14 and the standard deviation of, Financial Management

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Stock abc has a beta of 14 and the standard deviation of

Stock ABC has a beta of 1.4 and the standard deviation of its returns is 30%. The market risk premium is 5% and the risk-free rate is 3%.

1. What is the expected return for the stock?

2 .What are the expected return and standard deviation for a portfolio that is equally invested in the stock and the risk-free asset?

3. If you forecast that next year stock ABC will have return of 10%. Would you buy it? Why or why not?

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Financial Management: Stock abc has a beta of 14 and the standard deviation of

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Financial Management: Stock abc has a beta of 14 and the standard deviation of

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