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Your financial planner gave you the following information about the two stocks. The risk free rate is 3%.

Google expected return 15% s.d. of return 8% Beta 1.2

GE expected return 9% s.d. of return 5%

1. Which one is a better investment opportunity based on Sharpe Ratio?

2. You want to invest $2,400 on GE and the $5,600 on Google. What is the expected return of your portfolio of two stocks?

3. Given the risk free rate 3%, Google’s Beta and expected return rate above, what must be the expected return rate of the stock market E(rm) according to CAPM formula?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93049352

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