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

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## 1)

## Part 1

Diversification is _____. It _____.

## 2)

## Part 1

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

## 3)

## 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?

## 4)

## 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

## 5)

## 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?

## 6)

## Part 1

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

## 7)

## 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?

## 8)

## 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?

## 9)

## Part 1

The graphical representation of the CAPM is called the _____.

## 10)

## 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%?

## 11)

## 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%?

## 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?

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