Question

beta High Tech Market US Rubber T-bills Collections 1.32 1.00 0.88 0.00 -0.87 12.17 S.S15=1.05 9.9= 5.5t

Answer 1

Ans 6) standard deviation of given portfolio will be given by following formula

standard deviation = root of (weight of stock Hitech^2 * standard deviation of high tech^2 + weight of stock USR^2 * standard deviation of stock USR^2 + weight of stock hitech * weight of stock USR * standard deviation of stock hitech * standard deviation of stock USR * correlation between hitech and USR)

since correlation is not given we cant find the exact answer but if you put correlation value in the below solution you will get the exact result

= (.2^2 * .2^2 + .8^2 * .188^2 + .2*.8*.2*.188*correlation between stocks)^(1/2)

= (.02422 + .003776*correlation between stock)^(1/2)

Ans 12) using capm model we will find the return on the stock as below:

return on stock = risk free rate + beta * market risk premium

9% = 4% + 1.1* market risk premium

market risk premium = 5%/1.1

now we will use this value of market risk premium to find the rate of return for Bigger's stock

Return on bigger stock = risk free rate + beta * market risk premium

= 4% + .8 * 5%/1.1

= 7.6%