7 Problem 12-4 Specific versus Market Risk (LO1) 10 Este 22.11 shows plots of monthly rates of return on three stocks ve

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7 Problem 12 4 Specific Versus Market Risk Lo1 10 Este 22 11 Shows Plots Of Monthly Rates Of Return On Three Stocks Ve 1 (45.87 KiB) Viewed 70 times

7 Problem 12-4 Specific versus Market Risk (LO1) 10 Este 22.11 shows plots of monthly rates of return on three stocks versus the stock market index. The beta and standard deviation of each stock is given beside its plot Required: a. Which stock is safest for a diversified investor? b. Wich stock is safest for an undiversified investor who puts all her funds in one of these stocks? c. Consider a portfolio with equal investments in each stock. What would this portfolio's bets have been? d. Consider a well diversified portfolio made up of stocks with the same beta as Intel What are the beta and standard deviation of this portfolio's return? The standard deviation of the market portfolio's returns 20% . What is the expected rate of return on each stock? Use the capital asset pricing model with a market risk premium of 8%. The tisk tree rate of interestis 4% CH Complete this question by entering your answers in the tabs below. beg A and By Regc Reg D Regt Which stock is safest for a diversified investor and universified Investor who puts all her funds in one of these stocks? Diversited vestor b. Universited investor Reqc >