ANSWER QUESTION 5 PLEASE. Expected Rate of return ...
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Finance
ANSWER QUESTION 5 PLEASE.
Expected Rate of return
Scenario
Probability
T-Bills
S&P 500
Utility Company
High-Tech Company
Counter-Cyclical Company
Recession
20%
5%
-10%
6%
-25%
20%
Near Recession
20%
5%
-6%
7%
-20%
16%
Normal
30%
5%
12%
9%
15%
12%
Near Boom
10%
5%
15%
11%
25%
-9%
Boom
20%
5%
20%
14%
35%
-20%
Based on the above returns, Jenna calculated the betas of the three stocks as follows:
Beta of Utility Company = 0.22
Beta of High-Tech Company = 2.02
Beta of Counter-Cyclical Company = -1.13
Imagine you are Jenna. Prepare a report for Kevin to help him understand the concepts of risk and return. Include the following things in your report (dont just copy from the textbook, explain things in your own words):
5) What would happen if Kevin were to put 70% of his portfolio in the high-tech stock and 30% in the S&P 500 Index fund? Would this combination be better for him? Explain. Calculate the expected return and the beta of this portfolio to answer the question.
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