Stock Expected Return Standard Deviation Beta A 10% 20% 1.0 B 10% 10% 1.0 C 12%

Question

Stock Expected Return Standard Deviation Beta
A 10% 20% 1.0
B 10% 10% 1.0
C 12% 12% 1.4

Portolio AB has half of its funds invested in Stock A and half in Stock B. Portfolio ABC has one-third of is funds invested in each of the three stocks. The risk-free rate is 5%, and market equilibrium, so required returns equal expected retuns. Which of the following statmens is correct?

A. Portfolio ABC's expected return is 10.66667%
B. Portfolio AB's coefficient of variation is greater than 2.0
C.Portfolio AB's required return is greater than the required return on stock A
D. Portfolo ABC has a standard deviation of 20%
E. Portfolio AB has a standard deviation of 20%.

Explanation / Answer

A. Portfolio ABC's expected return is 10.66667% 10+10+12 all over 3. you average stocks to get expected return

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