Problem: You have the following information on the two securities in which you have invested
Expected Standard Security Amount
Return Probability Deviation Beta Invested
Kodak 15% .35 4.5% 1.20 $45,000
Xerox 12% .65 3.8% 0.98 $55,000
1) Which stock is riskier in a portfolio context? Which stock is riskier if you are not considering them in a portfolio? Explain.
2) Compute the expected return on the portfolio.
3) Compute the beta for the portfolio.
4) Given the following information, Compute is the expected return on General Motors.
Probability Expected Amount
Return Invested
0.2 -15 $5,000
0.3 20 8,000
0.4 25 10,000
0.1 40 15,000