Stock x is lying on sml and its expected return in the, Financial Management

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Stock x is lying on sml and its expected return in the

Stock X is lying on the SML and its expected return in the market is 15%. Stock Y is 1.5% above the SML and its expected return in the market is 10%. The standard deviation of the market portfolio and Stock X are 14% and 24% respectively. The market price of risk is 7% and the risk-free return is 3%.

1. What is the beta of Stock X and Stock Y?

2. What are the systematic risk and unsystematic risk of Stock X?

3. What are the correlation coefficient and covariance between Stock X and market portfolio?

4. Assume you are forming a portfolio that comprises 60% in Stock X and 40% in the market portfolio, what are the systematic risk and variance of the portfolio?

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