Explain what CAPM tells us and how to practically use CAPM beta for investment decisions. Consider the following informa

[answerhappygod]

Explain What Capm Tells Us And How To Practically Use Capm Beta For Investment Decisions Consider The Following Informa 1 (28.62 KiB) Viewed 18 times

Explain what CAPM tells us and how to practically use CAPM beta for investment decisions. Consider the following information about three stocks: | State of Probability of Expected Expected Expected returns of Economy State of returns of returns Economy Stock A Stock B Stock C Boom 35% 24% 36% 55% Normal 50% 17% 13% 9% Bust 15% 0% -28% -45% a. If your portfolio is invested, 40 percent each in stock A and stock Band 20 percent in stock C, what is the portfolio expected return and the standard deviation and variance. b. You own a stock portfolio invested 25 percent in Stock Q, 20 percent in Stock R, 15 percent in Stock S, and 40 percent in Stock T. The betas for these four stocks are 84, 1.17, 1.11, and 1.36, respectively. What is the portfolio beta? c. A stock has an expected return of 13.5 percent, its beta is 1.17, and the risk-free rate is 5.5 percent. What must the expected return on the market be? of