Make up an example of two different investments where one has a higher dollar gain but a lower HPR.
Which type of risk need we not worry about so much and why?
You currently hold shares of stock A and are considering adding either stock B or Stock C to your holdings. Make up correlation coefficients between A and B and between A and C and then indicate which stock you should add in order to minimize the risk of your portfolio.
Stock A has an expected return of 8% and a standard deviation of 10%. Make up three different sets of values for these two variables for a stock that a rational risk-averse investor would consider to be (a) better than A; (b) inferior to A; and (c) for which the investor would be indifferent between it and stock A.
If the MRP is 7 percentage points and the risk-free rate is 2%, what is the expected return on the market?