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Leya [2.2K]
3 years ago
10

Stock A has an expected return of 10% and a standard deviation of 20%. Stock B has an expected return of 13% and a standard devi

ation of 30%. The risk-free rate is 5% and the market risk premium, rM- rRF, is 6%. Assume that the market is in equilibrium. Portfolio AB has 50% invested in Stock A and 50% invested in Stock B. The returns of Stock A and Stock B are independent of one another, i.e., the correlation coefficient between them is zero. Which of the following statements is CORRECT? a. Portfolio AB's required return is 11%. b. Portfolio AB's standard deviation is 25%. c. Stock A's beta is 0.8333. d. Stock B's beta is 1.0000. e. Since the two stocks have zero correlation, Portfolio AB is riskless.
Business
1 answer:
Nina [5.8K]3 years ago
3 0

Answer:

Expected Portfolio return = 0.5(10)+0.5(13)= 5+6.5=11.5%

Expected Portfolio SD= 0.5(20)+0.5(30)= 25%

Beta of A, 10= 5+B(6)

5=6B

B= 5/6= 0.833

B of B, 13=5+B(6)

8=6B

B=8/6

B=1.33

b. Portfolio AB's standard deviation is 25%

c. Stock A's beta is 0.8333

These two statements are correct

Explanation:

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Answer:

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Therefore the we multiplied the sale unit with cost per unit, in the similar way we multiplied the Variable production cost unit with cost per unit and Variable selling and administrative costs with cost per unit to reach the contribution margin.

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Answer:

Expenditures $300,000; Supplies inventory $150,000.

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