3. An investor has a stock portfolio. Each stock (listed below) in the portfolio has the following market values and betas.
Stock Market Value Beta
Coca-Cola $8,085 0.89
Cisco Systems $1,900 1.1
AT&T $12,900 0.60
Northrop Grumman $6,000 1.2
What can an investor expect from this portfolio?
a. This portfolio will have higher levels of volatility than the market.
b. The portfolio's unsystematic risk is measured through beta which is 0.84.
c. This portfolio has less systematic risk than the market.
d. This portfolio has less money invested in low beta stocks and more money invested in high beta stocks.
4. A stock has the same level of systematic risk as the market. The stock has an expected return of 14%. The risk free rate is 5%. find out the market risk premium.
5. The stocks of Microsoft and Apple have a correlation of 0.6. Microsoft and Apple stock have variances of 30% and 40%. What is their covariance?