Laura Spegele is considering purchasing a stock that youbelieve will offer an in
ID: 2662140 • Letter: L
Question
Laura Spegele is considering purchasing a stock that youbelieve will offer an inferior return for the risk she willbear. To convince her that her acquisition is not desirable,you want to demonstarte the trade-off between risk andreturn. Currently U.S treasury bills offer 7%. Three possible stocksand their betas are as follows: Security ExpectedReturn Beta StockA 9% 0.6 StockB 11 1.3 StockC 14 1.5 T-bills no beta = 0 1. What will be the expected return and beta for each of thefollowing portfolio's? a) Portfolio's 1-4 : All of the funds are invested soleyin one asset (the corresponding three stocks or the TreasuryBill) b) Portfolio 5: One-quarter of the funds are invested in eachalternative. c) Portfolio 6: One-half of the funds are invested in Stock Aand one-half in Stock C. d) Portfolio 7: One-third of the funds are invested in eachstock. 2. Are any of the portfolio's inefficient? 3. Is there any combination of the Treasury Bill Stock C thatis superior to portfolio 6(i.e., half the funds in stock A and halfin stock C)? 4. Since your client's suggested stock has an anticipatedreturn of 12 percent and a beta of 1.4, does that information arguefor or against the purchase of the stock> Compare. 5. Why is it important to consider purchasing an asset as partof a portfolio and not as an independent act?Have the answers to Questions 1 & 2, but not sure how tofigure #3 or #4 Laura Spegele is considering purchasing a stock that youbelieve will offer an inferior return for the risk she willbear. To convince her that her acquisition is not desirable,you want to demonstarte the trade-off between risk andreturn. Currently U.S treasury bills offer 7%. Three possible stocksand their betas are as follows: Security ExpectedReturn Beta StockA 9% 0.6 StockB 11 1.3 StockC 14 1.5 T-bills no beta = 0 1. What will be the expected return and beta for each of thefollowing portfolio's? a) Portfolio's 1-4 : All of the funds are invested soleyin one asset (the corresponding three stocks or the TreasuryBill) b) Portfolio 5: One-quarter of the funds are invested in eachalternative. c) Portfolio 6: One-half of the funds are invested in Stock Aand one-half in Stock C. d) Portfolio 7: One-third of the funds are invested in eachstock. 2. Are any of the portfolio's inefficient? 3. Is there any combination of the Treasury Bill Stock C thatis superior to portfolio 6(i.e., half the funds in stock A and halfin stock C)? 4. Since your client's suggested stock has an anticipatedreturn of 12 percent and a beta of 1.4, does that information arguefor or against the purchase of the stock> Compare. 5. Why is it important to consider purchasing an asset as partof a portfolio and not as an independent act?
Have the answers to Questions 1 & 2, but not sure how tofigure #3 or #4
Explanation / Answer
I don't understand one word of what you are talking about! Who is cheating and what do you mean?
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