What is the required rate of return for each stock

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1. Calculate the variability (standard deviation) of the stock returns of California REIT and Brown Group during the past 2 years. How variable are they compared with Vanguard Index 500 Trust? Which stock appears to be riskiest? How might the expected return for each stock relate to its riskiness?

2. Suppose Beta's Position had been 99% of equity funds invested in the index fund and 1% in the individual stock. Calculate the variability of this portfolio using each stock. How does each stock affect the variability of the equity investment, and which stock is riskiest?

3. Make a Portfolio with the weights of your choosing, you can use two or all 3 investment. Does your risk decreases? How about your return? Explain the reasoning behind your choosing these weights.

4. Calculate the beta for each stock. How does this relate to the situation described in Question #2?

5. What is the required rate of return for each stock (CAPM)? Explain the number and put it into context?

Reference no: EM131884751

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