FIN 320 6-2 Journal Risk and Return in Investing - Roleshia Bickham

In a CAPM world, what do you need to know in order to estimate an asset's expected return? Group of answer choices The risk free rate, the market risk premium, and the asset's standard deviation The risk free rate, the market risk premium, and the asset's beta The corporate bond rate, the expected return on the S&P 500 and the asset's Beta Market sentiment, historical stock returns and the risk free rate

A stock's required rate of return The part of a stock's risk that can be eliminated is know as _______________risk   The portion of the stock's risk that cannot be eliminated is called ___________ risk Answer 2 Question 5 Market risk is also referred to as ________________ risk Answer 3 Question 5 The ______ coefficient measures a stock's relative volatility as compared with a stock's market index.

13. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percent) REQUIRED RATE OF RETURN (Percent) 20.0 16.0 20 12.0 16 8.0 12 4.0 0 0 CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's betal Required rate of return on Happy Corp. stock 0 Happy Corp.'s new required rate of return is F 0.6, 7.6 HC's Stock ☐ 0.5 An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.'s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst's prediction. 0 1.0 RISK (Beta) Tool tip: Mouse over the…

Subject  :- Finance

11. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows:     CAPM Elements Value Risk-free rate (rRFrRF) ________?     Market risk premium (RPMRPM) __________?  Happy Corp. stock’s beta  ___________? Required rate of return on Happy Corp. stock   ___________?   An analyst believes that inflation is going to increase by 3.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML.

Question 1 a. Distinguish between the following:i. Primary market and secondary market ii. Money market and capital market iii. Fixed income security and convertible security iv. Systematic risk and Unsystematic risk b. You are an investment advisor and you are asked to guide a new investor to trade shares on the Ghana Stock Exchange (GSE). Explain any six (6) of the listing requirement of GSE that are to be met before the company can start trading on the market.   Question 2 a. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests in stocks, bonds, short-term money market instruments and other securities. The performance of these mutual funds and the portfolio they build needs to be evaluated as frequently as possible. Evaluating the performance of these mutual funds is important for both existing and potential investors. The Table below provides the average return, standard deviation and betas of selected…

Q1)VaR can be defined as the minimal loss of a financial position during a given time period for a given probability. true or fslse  Q2 Stocks tend to move together if they are affected by ________. common economic events events unrelated to the economy idiosyncratic shocks unsystematic risk Q3)Beta can be viewed as a measure of systematic risk TRUE OR FASE

Question 2 The following is the information for securities of ABC plc and XYZ plc: XYZ plc 26 40 1.25 Particulars Expected return Standard deviation Beta ABC plc 25 42 0.85 The correlation coefficient between the returns of the two securities is 0.70 and standard deviation of the market return is 20%. Required (a) As a new graduate accountant, CPA(T), determine if it is better to invest in securities of ABC plc or XYZ plc (b) If the proportional of investment in ABC plc is 40% and that in XYZ plc is 60% determine the expected rate of return and portfolio standard deviation (c) Determine the risk free rate

GENERAL FINANCE MCQ

q4- What causes the fact that, for a given level of return, large portfolios of investments have less risk than individual shares? Select one: a. Unsystematic risk. b. Systematic risk. c. Market risk. d. Common risk.

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Discuss how to determine the risk or beta of a stock, the required rate of return of a stock and the value of a stock.  How do you determine if a stock has high or low or average risk when compared to the S&P 500? How do you determine if a stock is overpriced, underpriced or fairly priced? Explain and Discuss.

ces Problem 6-14 (Algo) Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. The characteristics of two of the stocks are as follows: Correlation = -1 Rate of return Stock A B Required: a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be formed to create a "synthetic" risk-free asset?) (Round your answer to 2 decimal places.) Yes No Expected Return 5% 10% % Standard Deviation 45% 55% b. Could the equilibrium rf be greater than rate of return?

The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows:   00.51.01.52.020.016.012.08.04.00REQUIRED RATE OF RETURN (Percent)RISK (Beta)Return on HC's Stock   CAPM Elements Value Risk-free rate (rRFrRF)      Market risk premium (RPMRPM)      Happy Corp. stock’s beta      Required rate of return on Happy Corp. stock        An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.’s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst’s prediction. Happy Corp.’s new required rate of return is    .   Tool tip: Mouse over the points on…

please answer these two fast: 26. What is the most likely correlation coefficient between a stock-index mutual fund and the S&P 500?     -1     .5     0     1 25. Market risk is also called ________ and ________.     unique risk; diversifiable risk     systematic risk; nondiversifiable risk     unique risk; nondiversifiable risk     systematic risk; diversifiable risk

Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.70 1.39 a. Expected return on market b. Risk-free rate Expected Return .180 .153 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % %

Could you help me with Question 2 in part 2 please.  Probability distribution for stock.....A) B) C) Thank you