Transcribed Image Text
Consider the following situation:State of EconomyProbability of State of EconomyReturns if State OccursStock AStock BStock CBoom20%25%10%5%Recession80%-30%5%10%The expected return on the marketportfolio is 7% and the US Treasury bill yields 3%. The capitalmarket is currently in equilibrium.Which stock has the most systematic risk? Provide all the stepsand equations.Which stock has the most unsystematic risk? Explain why.Provide all the steps and equations.What is the standard deviation of a portfolio which iscomprised of $8,400 invested in stock A,$3,600 in stock B, and$8,000 in stock C?If the expected inflation rate is 2.5%, what is theexactexpected real return on the portfolio of part (c)?
Other questions asked by students
Mechanical Engineering
Biology
Calculus
Accounting