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##### Which of A and B has the least total risk?

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Question;Use the following information to answer the questions below. (10 marks)Security Return Standard Deviation BetaA 15% 8% 1.2B 12% 14% 0.9a. Which of A and B has the least total risk? The least systematic risk?b. What is the value of systematic risk for a portfolio with 75% of the funds invested in A and 25% of the funds invested in B?c. Calculate the risk free rate of return and the market risk premiumd. What is the portfolio expected return and the portfolio beta if you invest 30% in A, 30% in B, and 40% in the risk-free asset?(For questions (d) and (e), assume the risk free rate of return is 5%.)e. What is the portfolio expected return with 125% invested in A and the remainder in the risk-free asset via borrowing at the risk-free interest rate?f. What is the beta of the portfolio created in part (e)?

Paper#49891 | Written in 18-Jul-2015

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