1) The probability distribution of returns on Voyager Therapeutics and Nightstar Therapeutics stocks are provided...
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1) The probability distribution of returns on Voyager Therapeutics and Nightstar Therapeutics stocks are provided below. Frieda holds a Portfolio F made up of 35% invested in the Voyager stock and the remaining in the Nightstar stock. Probability Voyager Nightstar 0.40 12% 11.6% 0.30 7% 8.1% 0.30 4.5% | Expected Return 8.25% 9.92% Standard Deviation 3.2113% 1.4750% Beta 0.49 0.38 9.5% The risk-free rate of return is 5.98% and the market risk premium is estimated to be 5.2%. a) Compute the expected return and standard deviation of returns on Portfolio F. b) Has Portfolio F achieved any diversification? Briefly explain why or why not. c) What is the beta of Portfolio F? d) Using CAPM, what is the required rate of return on Portfolio F? e) Will the expected market price of Portfolio F be higher or lower than its intrinsic value
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