Question

Dr. GRECO a young CEO who holds an MBA degree from the “Hermes Rinke-Dinke” University understands completely the Portfolio Risk Diversification Concept. However, he/she forgot the finance formulae and cannot compute the portfolio results. Assist him/her using the Table I below to compute the following relationships:

Table I

Time	R [INTC]	R [Market]	PROB
2017	14%	35%	0.2
2018	17%	24%	0.3
2019	16%	28%	0.3
2020	19%	32%	0.2

1. The Expected Returns.
2. The Variances.
3. The Risks.
4. The Covariance
5. The Coefficient of Variations.
6. The Correlation Coefficient.
7. The Beta of the stock. Is the Stock Aggressive or Defensive?
8. Assume that the Risk-Free Rate is 3%. Calculate the Sharpe’s and Treynor’s Indices.
9. Derive the CAPM Model. Is it in equilibrium? Explain your answer.
10. Draw the CML, SML and the Efficient Frontier.
11. What is the difference between the CML and the SML lines?
12. How much is the Risk Premium?

Comment on your results analytically.

Answer 1