Consider the following information for three stocks, Stock A, Stock B, and Stock C. The returns on each of the three stocks are positively correlated, but they are not perfectly correlated. (That is, all of the correlation coefficients are between 0 and 1.)
Stock - Expected Return - Standard Deviation - Beta
Stock A - 10% - 20% - 1.0
Stock B - 10 - 20 - 1.0
Stock C - 12 - 20 - 1.4
Portfolio P has half of its funds invested in Stock A and half invested in Stock B. Portfolio Q has one third of its funds invested in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium.
What is the market risk premium RPM?
a. 4.5%
b. 5.0%
c. 6.0%
d. 5.5%
e. 4.0%
Answers (1)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Consider the following information for three stocks, Stock A, Stock B, and Stock C. The returns on each of the three stocks are positively ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Pixel Copies recorded a cash collection on account by debiting Cash and crediting Accounts Payable. What will the trial balance show for this error? A. The trial balance will not balance B. Expenses are overstated C. Liabilities are overstated D.
Answers (1)
Assume that the market equilibrium price is 50 cents for a pound of bananas, and the quantity sold is roughly 10 pounds.
Answers (1)
Pharoah Company sells merchandise on account for $3600 to with credit terms of 2/14, n/30. Blue Spruce Corp. returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period.
Answers (1)
One of the advantages of starting your own business is
Answers (2)
What is remittance advice note?
Answers (1)
New Questions in Business
A company recently paid out a $4 per share dividend on their stock. Dividends are projected to grow at a constant rate of 5% into the future, and the required return on investment is 8%.
Answers (1)
What is the average tax rate for a firm with taxable income of $118,740 in 2017? Taxable Income Tax Rate $ 0 - 50,000 15 % 50,001 - 75,000 25 75,001 - 100,000 34 100,001 - 335,000 39 Group of answer choices 34.87 percent 39.00 percent 24.
Answers (1)
State chartered banks are required to become members of the federal reserve system. a. True b. False
Answers (1)
Freddie's Market offers customers tissues, canned goods, napkins, and various detergents in basic packaging with no identified brand.
Answers (1)
What is responsible for guiding the monetary policy of the United States? O A. The Sarbanes-Oxley Act O B. Trade agreements C. Contract law O D. The Federal Reserve System
Answers (1)