Rate of return and expected rate of return

1. Explain the difference between required rate of return and expected rate of return. If they are different at a specific point in time, what does it mean?2. What is the difference between an expected return and a total holding period return?3. How does investing in more than one asset reduce risk through diversification?Beta is a measure of systematic risk. This subject is covered in your text and there is reference to a convenient place to find betas for individual companies. That place is MSN Money Central ( moneycentral.msn.com/home.asp). Select a large corporation and report on the price and estimate of the beta. Also, indicate how you would interpret the beta for the company you select. Your response (200 words or less)

Abraham Ford owns a portfolio that has a value of $300,000 and consists of only 3 stocks. He has $60,000 worthof stock A, which has a beta of 1.25; he has 8,000 shares of stock B, which has a share price of $22.50 and a betaof -0.05; and he has some stock C, which has a beta of 0.9. What is the beta of Abraham Ford’s portfolio?Eugene stock had returns of 21.70% (1 year ago), 2.40% (2 years ago), X (3 years ago), and -14.60% (4 years ago)in each of the past 4 years. Over the past 4 years, the geometric average annual return for Eugene stock was2.85%.

What was the arithmetic average annual return for the stock over the past 4 years?

Solution: