Question

You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset:

  

a.	Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places. (e.g., 32.16))

  

Security	Expected Return	Standard Deviation	Correlation*	Beta
Firm A	.100	.41		.86
Firm B	.150		.60	1.41
Firm C	.170	.66	.45
The market portfolio	.12	.21
The risk-free asset	.05

b-1.	What is the expected return of Firm A? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

  

Expected return

  

b-2.

What is your investment recommendation for someone with a well-diversified portfolio?

	Buy
	Sell

  

b-3.	What is the expected return of Firm B? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

  

Expected return

  

b-4.

What is your investment recommendation for someone with a well-diversified portfolio?

	Buy
	Sell

  

b-5.	What is the expected return of Firm C? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

  

Expected return

  

b-6.

What is your investment recommendation for someone with a well-diversified portfolio?

	Sell
	Buy

Answer 1