Monthly rates of return for (a

Monthly rates of return for (a) Marathon Oil, (b) Intel, and (c) Walmart, plus the market portfolio for the five years ending December 2017 30% 20% 10% -10% 0 % -5% 109% 5% 5 10% Marathon Oil return (%) -20% — Beta = 2.39 Std dev = 43.7% -30% (b) 30% 25% + % 20% + . 15% + 1006 + – 5% Intel retum (%) -10% Op 99% -59 596 10% % -5% -10% + -15% + Beta = 1.07 -20% Std dev = 20.5% Market return (%) ) FIGURE 12.11 (continued) (c) 30% 25% 20% 15% 10% + 5% + -10% -5% 5% 10% OP -5% Return on Walmart -10% -15% Beta = .37 -20% Std dev = 16.4% Market return (%) Required: a. Which stock is safest for a diversified investor? b. Which stock is safest for an undiversified investor who puts all her funds in one of these stocks? c. Consider a portfolio with equal investments in each stock. What would this portfolio’s beta have been? d. Consider a well-diversified portfolio made up of stocks with the same beta as Intel. What are the beta and standard deviation of this portfolio’s return? The standard deviation of the market portfolio’s return is 20%. e. What is the expected rate of return on each stock? Use the capital asset pricing model with a market risk premium of 8%. The risk- free rate of interest is 4%. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg A and B Reg C Reg D Reg E Which stock is safest for a diversified investor and undiversified investor who puts all her funds in one of these stocks? a. Intel Diversified investor Undiversified investor b. Walmart

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