Question

What is the rate of return on an investment that costs $500 and is sold after...

  1. What is the rate of return on an investment that costs $500 and is sold after 1 year for $560?
  2. What are the expected return and the standard deviation for the CoR Stock?

                                                            CoR Stock

Scenario

Probability of Scenario

Rate of Return

Worst Case

0.10

−11%  

Poor Case

0.20

−4%  

Most Likely

0.40

−2%  

Good Case

0.20

8%  

Best Case

0.10

14%  
  1. Your client decides to invest $1.4 million in Flama stock and $0.6 million in Blanca stock. The risk-free rate is 4% and the market risk premium is 5%. The beta of the Flama Stock is 1.2; and the beta of the Blanca stock is 0.8.
    1. What are the weights for this portfolio?
    2. What is the portfolio beta?
    3. What is the required return of the portfolio?
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