# Hello there, I need some help for these very easy FIN 361 (Financial Management) questions please.

## Part 1

Diversification is _____. It _____.

## Part 1

As different securities are added to a portfolio, the portfolio’s total risk _____.

## Intro

Nautilus Clothing’s stock has a 40% chance of producing a 15% return, a 20% chance of producing a 18% return, and a 40% chance of producing a -13% return.

## Part 1

What is the stock’s expected return?

## Intro

The table below shows the expected rates of return for three stocks and their weight in some portfolio:

 Stock A Stock B Stock C Expected return 0.08 0.03 0.12 Weight 0.2 0.2 0.6

## Part 1

What is the expected portfolio return

## Intro

The table below shows the expected rates of return for three stocks and their weights in some portfolio:

 Stock A Stock B Stock C Portfolio weights 0.4 0.2 0.4 State Probability Expected returns Recession 0.3 0.06 0.03 0.15 Boom 0.7 0.11 0.05 0.16

## Part 1

What is the portfolio return during a recession?

## Part 2

What is the expected portfolio return?

## Part 3

What is the standard deviation of the portfolio returns?

## Part 1

Securities whose prices move less than the market have _____ betas.

## Intro

The table below shows the betas and portfolio weights for 3 stocks:

 Portfolio weights Stock Beta Portfolio 1 Portfolio 2 A 1.7 0.3 0.1 B 1.1 0.5 0.4 C 0.4 0.2 0.5

Calculate the beta of each portfolio.

## Part 1

What is the beta of portfolio 1?

## Part 2

What is the beta of portfolio 2?

## Part 3

If you are more concerned about risk than return, which portfolio should you pick?

## Intro

You’ve assembled the following portfolio:

 Stock Expected return Beta Portfolio weight 1 0.074 1.8 0.2 2 0.053 1.1 0.5 3 0.047 0.9 0.3

## Part 1

What is the beta of the portfolio?

## Part 2

What is the expected return of your portfolio?

## Part 1

The graphical representation of the CAPM is called the _____.

## Intro

A stock has a beta of 1.8. The risk-free rate is 4%. Assume that the CAPM holds.

## Part 1

What is the expected return for the stock if the expected return on the market is 8%?

## Part 2

What is the expected return for the stock if the expected market risk premium is 8%?

## Intro

Use the expected return-beta equation from the CAPM.

## Part 1

What is the expected return for a stock if the risk-free rate is 2%, beta 0.6 and the expected return for the market portfolio is 6%?

## Part 2

What is the risk-free rate if beta is 1.1, the expected return 6.3% and the expected return for the market portfolio is 6%?

## Part 3

What is beta if the risk-free rate is 2%, the expected return 12% and the expected return for the market is 6%?

## Part 4

What is the expected return for the market if the risk-free rate is 2%, beta 0.6 and the expected return 12%?

## Intro

We know the following expected returns for stocks A and B, given different states of the economy:

 State (s) Probability E(rA,s) E(rB,s) Recession 0.3 -0.04 0.04 Normal 0.5 0.11 0.07 Expansion 0.2 0.19 0.11

The expected return on the market portfolio is 0.08 and the risk-free rate is 0.02.

## Part 1

What is the standard deviation of returns for stock A?

.

## Part 2

What is the standard deviation of returns for stock B?

## Part 3

What is the beta for stock A?

## Part 4

What is the beta for stock B?

## Part 5

Which stock has more total risk?

## Part 6

Which stock has more systematic risk?