You are interested in investing in a portfolio including stocks A, B, C and D. You have talked to three different financial strategists: Dan, Paul and Mary.
Assuming that the risk-free rate is 4% and the expected return on the market is 12%. Who should you take their advice? (choose one person) (show formulas and all work)
|
Stock
|
Beta
|
Dan's Investment
|
Paul's Investment
|
Mary's Investment
|
|
A
|
1.3
|
2500
|
5000
|
10,000
|
|
B
|
1.0
|
2500
|
5000
|
10,000
|
|
C
|
0.8
|
2500
|
5000
|
-5000
|
|
D
|
-0.5
|
2500
|
-5000
|
-5000
|