[emalone1252]

4. There are few, if any real companies with negative betas. But suppose you found one with beta =-.25.

a.How would you expect this stock's rate of return to change if the overall market rose by an extra 5 percent? What if the market fell by an extra 5 percent?
b.You have $1 million invested in a well-diversified portfolio of stocks. Now you receive an additional $20,000 bequest. Which of the following actions will yield the safest overall portfolio return?

I invest $20,000 in Treasury bills (which have beta = 0)
Ii invest $20,000 in stock with beta= 1.
Iii invest $20,000 in the stock with beta = -.25
Explain your answer.

Your eccentric Aunt Claudia has left you $50,000 in Alcan shares plus $50,000 cash. Unfortunately her will requires that the Alcan stock not to be sold for one year and the $50,000 cash must be entirely invested in the one stocks shown.
What is the safest attainable portfolio under restrictions?

Correlation Coefficients
Alcan BP Deutsche Bank KLM LVNH Nestle' Sony Standard
Deviation
Alcan 1.0 .39 .55 .54 .61 .26 .36 30.2%
BP 1.0 .23 .29 .22 .30 .14 23.9
Deutsche Bank 1.0 .36 .48 .16 .19 38.1
KLM 1.0 .49 .32 .50 54.5
LVMH 1.0 .02 .10 42.0
Nestle' 1.0 1.0 15.5
Sony 47.5

[morgaine300]

Please always start your own thread for your question instead of tagging onto someone else's. That was a 3 year old thread everyone kept dragging back up. I've moved yours to its own thread.

Also please see the guidelines for posting homework:
https://www.askmehelpdesk.com/financ...-b-u-font.html