Essay
Answer the questions below using the following information on stocks A,B,and C.
Assume the risk-free rate of return is 3% and the expected market return is 12%
a.Calculate the required return for stocks A,B,and C.
b.Assuming an investor with a well-diversified portfolio,which stock would the investor want
to add to his portfolio?
c.Assuming an investor who will invest all of his money into one security,which stock will the investor choose?
Correct Answer:
Verified
a.Stock A: 3% + (12% - 3%)(1.8)= 19.2%
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Correct Answer:
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