Question

In: Finance

You have observed the following returns over time:    Year Stock X Stock Y Market 2015...

You have observed the following returns over time:

   Year

Stock X

Stock Y

Market

2015

15%

14%

13%

2016

18

5

9

2017

-16

-3

-11

2018

2

2

2

2019

20

12

17

Assume that the risk-free rate is 6% and the market risk premium is 4%.

a. What are the betas of Stocks X and Y?

Stock X: 1.3

Stock Y:

b. What are the required rates of return on Stocks X and Y?

Stock X:  11.2 %

Stock Y:   %

c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago
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