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Need some help with my Accounting 201 class?

Asked by JHUstudent (678 points ) March 14th, 2012

Just have a couple questions that I’m stumped by. Any help would be much, much appreciated. With lurve coming your way, of course.

Here are the questions:

The risk-free rate of return is 3.2%. The market risk premium currently stands at 5.5%. The
covariance between the excess returns of Company A vis-a-vis the S&P500 excess returns is 0.082.
The standard deviation of the excess returns of Company A is 0.4721 and the standard deviation of
the excess returns of the market is 0.2214. What is the expected return of Company A?

A) 5.2% B) 12.4% C) 7.0% D) 4.0%

The market portfolio has an expected return of 12% and a standard deviation of 22%. The current
risk-free rate of return is 4%. An investor who has a risk tolerance (portfolio standard deviation) of
8% should put what percent of his/her investable funds in the market portfolio?

A) 63.6% B) 66.7% C) 36.4% D) 33.3%

Given the same market conditions as described in the problem above, an investor with a risk
tolerance (portfolio standard deviation) of 30% can expect what level of annual return on his/her
investments?

A) 12% B) 22% C) 15% D) 30%

Thanks guy. If anyone has any help or solutions that’d be so great. In big need of help.

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