"5. (TCO 8) Assume you are considering investing in two stocks, A & B. Stock A has an expected return of 16% and Stock B has an expected return of 9.5%. Your goal is to create a two-security portfolio that will have an expected return of 12%. If you have $250,000 to invest today, approximately how much would you invest in Stock B? (Points: 3),$96,000 ,$150,000 ,$175,000 ,,More than $200,000,,6.Systematic versus Unsystematic Risk,Consider the following information about Stock I and II: ,,State of Probability of Rate of Return if State Occurs ,Economy State of Economy Stock I Stock II ,Recession 0.14 -0.15 -0.15 ,Normal 0.12 0.29 0.43 ,Irrational ex- 0.74 0.29 0.27 , uberance ,,The market risk premium is 8%, and risk-free rate is 2.8%. ,,a. What is the standard deviation percent on stock I’s expected return and the stock beta? ,b. what is the standard deviation percent on stock II’s expected return and the stock beta? ,c. Which stock I or stock II is "riskier"? ,,For standard deviation and beta: round answer to 2 decimal places. (eg:32.16) ,8. (TCO 8) Which statements are true regarding risk? Select all that apply: (Points: 4),The expected return is usually not the same as the actual return ,A key to assessing risk is determining how much risk an investment adds to a portfolio ,Some risks cannot be decreased or mitigated by the financial manager. ,The higher the risk, the higher the return investors require for the investment ,,
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