Which stock has the most total risk? Provide all the steps and equations.

You have a portfolio which is comprised of 70 percent of stock A and 30 percent...

You have a portfolio which is comprised of 70 percent of stock A and 30 percent of stock B. What is the expected return on this portfolio? State of Economy Probability E(R) A E(R) B Weight 0 60% 40% Boom 0.2 20% 15% Normal 0.6 12% 8% Recession 0.2 -10% 3% 7.30 percent 7.58 percent 8.03 percent 8.96 percent 9.40 percent

Which of the following Statements is most accurate? The greater the number of stocks in a...

Which of the following Statements is most accurate? The greater the number of stocks in a stock portfolio, the harder it would be to outperform a market index like the S&P 500 The greater the number of stocks in a stock portfolio, the higher the beta of the portfolio The greater the number of stocks in a stock portfolio, the lower the portfolio's systematic risk The beta of a sock portfolio will increase any time that one or more of...

1. Which term has a different meaning than the others? Diversifiable risk Unsystematic risk Market risk...

1. Which term has a different meaning than the others? Diversifiable risk Unsystematic risk Market risk Nonsystematic risk Firm-specific risk 2. Systematic risk is also called _____. Check all that apply: market risk non-diversifiable risk common risk fundamental risk 3. Nonsystematic risk is also called _____. Check all that apply: random risk unsystematic risk firm-specific risk diversifiable risk 4. Diversification is _____. It _____. the mixing of different assets within a portfolio; reduces overall portfolio risk buying more than three...

Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A...

Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Stock C Boom 0.30 50.0% 12.0% 20.0% Average 0.45 15.0% -5.0% 6.0% Recession 0.25 -8.0% 2.0% -3.2% Your portfolio manager has invested 30% of your money in Stock A, 50% in Stock B, and the rest in Stock C. 1. What is the correlation coefficient between Stocks B and C? 2. What is the standard deviation of your portfolio? Hint: Instead of...

If the economy enters a boom, the stock of Company E will return 20% and the...

If the economy enters a boom, the stock of Company E will return 20% and the stock of Company F will return 40%. On the other hand, if the economy enters a recession, the stock of Company E will return -10% and the stock of Company F will return -25%. The boom state is one-and-one-half times as likely as the recession state. The risk-free rate in the market is 2%, while the risk premium of the market portfolio is 6%....

Consider the following information on a portfolio of three stocks. State of Economy Probability of State...

Consider the following information on a portfolio of three stocks. State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom .13 .10 .35 .42 Normal .52 .18 .30 .28 Bust .35 .19 -.29 -.38 a. If your portfolio is invested 42 percent each in A and B and 16 percent in C, what is the portfolio’s expected return, the variance, and the standard deviation? b. If...

Consider the following information on Stocks I and II: Rate of Return if State Occurs State...

Consider the following information on Stocks I and II: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock I Stock II Recession .20 .03 -.22 Normal .30 .38 .14 Irrational exuberance .50 .32 .48 The market risk premium is 9 percent and the risk-free rate is 4.5 percent. a-1. What is the beta of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a-2. Which stock has the most...

Consider the following information on a portfolio of three stocks: State of Economy Probability of State...

Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom .15 .05 .21 .18 Normal .80 .08 .15 .07 Recession .05 .12 -.22 -.02 The portfolio is invested 35 percent in each Stock A and Stock B and 30 percent in Stock C. If the expected T-bill rate is 3.90 percent, what is the expected risk...

Suppose an economy has three states: boom, normal, and recession. Assume that the probability of a...

Suppose an economy has three states: boom, normal, and recession. Assume that the probability of a boom state is 0.2, a normal state is 0.5, and a recession state is 0.3. And there are three stocks in this economy, called Alpha, Beta, and Gamma respectively. The return performance of these stocks has been summarized by the following table: Alpha Beta Gamma boom 15% 28% 1% normal 6% 12% 3% recession -12% -30% 20% (Please show your intermediate processes, instead of...

Consider the following information on Stocks I and II: Rate of Return if State Occurs State...

Consider the following information on Stocks I and II: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock I Stock II Recession .25 .04 -.23 Normal .30 .30 .14 Irrational exuberance .45 .24 .40 The market risk premium is 13 percent and the risk-free rate is 4 percent. a-1. What is the beta of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a-2. Which stock has the most...