# (TCO 8) Assume you are considering investing in two stocks, A B. Stock A has an expected return of 16% and Stock B has an expected return of 9.

5. (TCO 8) Assume you are considering investing in two stocks, A & B. Stock A has an expected return of 16% and Stock B has an expected return of 9.5%. Your goal is to create a two-security portfolio that will have an expected return of 12%. If you have \$250,000 to invest today, approximately how much would you invest in Stock B? (Points: 3)\$96,000 \$150,000 \$175,000 More than \$200,0006. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. What is the beta of Stock I and II respectively? (Points: 3)0.6 and 1.2 1.2 and 0.6 1.2 and 0.4 Cannot be determined with the information given 7. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. Which statement is true? Select all that apply: (Points: 4)Stock I has more overall risk than Stock II Stock II has less systematic risk than Stock I Stock I has a higher risk premium than Stock II None of the above are correct statements 8. (TCO 8) Which statements are true regarding risk? Select all that apply: (Points: 4)The expected return is usually not the same as the actual return A key to assessing risk is determining how much risk an investment adds to a portfolio Some risks cannot be decreased or mitigated by the financial manager. The higher the risk, the higher the return investors require for the investment 