Subject: Finacial stratgy & policy 8-4: Is it possible to construct a portfolio of real-world stocks that has an expected return equal to the risk-free rate? 8-5: Stock A has an expected return of 7%,...

Subject: Finacial stratgy & policy

8-4: Is it possible to construct a portfolio of real-world stocks that has an expected return equal

to the risk-free rate?

8-5: Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a

correlation coefficient with the market of –0.3, and a beta coefficient of –0.5. Stock B has an

expected return of 12%, a standard deviation of returns of 10%, a 0.7 correlation with the


market, and a beta coefficient of 1.0. Which security is riskier? Why?