1. You are comparing two stocks, what risk measure should you consider if you are just going to hold an individual stock? What risk measure should you consider if you are just going to include the stock in a well diversified portfolio?
2. You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2 and has an average return of 15%. The risk free rate is 1% and the market return is 10%, is the manager’s active investing strategy working?
3. The risk-free rate is 2%, the market risk premium is 8.00%, and portfolio A has a beta of 2. What is the required rate of return on this portfolio?