Question 1 Your stock has a β = 1.53, the expected return on the stock market...

Question 1 Your stock has a β = 1.53, the expected return on the stock market is 17.33%, and the yield on T-bills is 3%. What is the expected return on your stock?

Question 2 Suppose you hold a portfolio of two stocks in the healthcare industry. The future outcomes for these stocks depend mainly on the next healthcare bill to be passed by Congress. The possible outcomes and returns are:

Outcome	Probability	Return for Stock A	Return for Stock B
1=Republican Bill	0.8	12%	-5%
2=Democratic Bill	0.2	3%	20%

What is the expected return and a standard deviation of a portfolio that has 50% of its value in stock A and 50% in stock B?

Group of answer choices

5.1% and 3.2%

7.5% and 4%

5.1% and 3.2%

9.9% and 3.2%

Solutions

Expert Solution

jeff jeffy answered 1 year ago

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