Consider the following situation:
State of Economy
Probability of State of Economy
Returns if State Occurs
The expected return on the market portfolio is 7% and the US Treasury bill yields 3%. The capital market is currently in equilibrium.
(a) Which stock has the most systematic risk? Why? Provide all the steps and
(b) Which stock has the most unsystematic risk? Why? Provide all the steps and
(c) What is the standard deviation of a portfolio which is comprised of $8400 invested in
stock A $3600 in stock B and $8000 in stock C?
Show work please so I know how to find the answer. Thanks!
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