Saddambek Final Exam December 14, 2023

use attachment to answer question  This question relates to Diagram 1 from the  Quiz 9.4 diagrams, which shows the Security Market Line. What is the expected return on the market?   Select one: a. 20% b. 10% c. 15% d. 5%

use attachment to answer questions This question relates to Diagram 1 from the  9.4 diagrams, which shows the Security Market Line. What is the expected return on the market?   Select one: a. 20% b. 10% c. 15% d. 5%

QUESTION 5 Exhibit 6.15 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset (A) Asset (B) E(RA) = 14% E(RB) = 16% (σA) = 13% (σB) = 18% WA = 0.4 WB = 0.6 COVA,B = 0.0024   Refer to Exhibit 6.15. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation ( σ i ), covariance (COVi,j), and asset weight (Wi) are as shown above?   a. 15.2%   b. 13.8%   c. 16.8%   d. 14.6%   e. 15.0%

Question 2 You must choose between two investments, X and Y . The profitability index (PI), net present value (NPV) and internal rate of return (IRR) of the two investments are as follows: Criteria Investment X Investment Y NPV R44 000 −R22 000 PI 1,945 0,071 IRR 16,00% 8,04% Which investment(s) should you choose, taking all the above criteria into consideration, if the cost of capital is equal to 12% per year? [1] X [2] Y [3] Both X and Y [4] Neither X nor Y [5] Too little information to make a decision 17 DSC1630

Q3a   Please assist to answer Q3a in detail write up

4. Suppose that we can describe the world using two states and that two assets are available, asset K and asset L. We assume the assets' future prices have the following distributions:

Question content area top Part 1 ​(Capital asset pricing​ model)  ​Anita, Inc. is considering the following investments. The current rate on Treasury bills is 7 ​percent, and the expected return for the market is 12.5 percent. Using the​ CAPM, what rates of return should Anita require for each individual​ security?   Stock Beta H 0.71 T 1.62 P 0.89 W 1.37 ​(Click on the icon    in order to copy its contents into a spreadsheet.​)       Question content area bottom Part 1 a.  The expected rate of return for security​ H, which has a beta of 0.71​, is enter your response here​%. ​(Round to two decimal​ places.) Part 2 b.  The expected rate of return for security​ T, which has a beta of 1.62​, is enter your response here​%. ​(Round to two decimal​ places.) Part 3 c.  The expected rate of return for security​ P, which has a beta of 0.89​, is enter your response here​%. ​(Round to two decimal​ places.) Part 4 d. The expected rate of return for…

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Which asset in the following table has the most market risk (also known as systematic or non- diversifiable risk)? Asset Return Beta Standard Deviation Asset A 11% 0.95 35% Asset B 13% 1.00 35% Asset C 9% 1.20 30% 1.) Asset C 2.) All three Assets 3.) Asset B 4.) Asset A and Asset B 5.) Asset A

Current Attempt in Progress Describe how investing in more than one asset can reduce risk through diversification. B I U T₂ T² T = = || E

Question 3  Assume you are given the following information regarding the expected returns for an asset, for different states of the economy.  Show work for all parts requiring computation. state.          probability       expected return Recession             0.1                 -0.04 normal                    0.5                    0.07 expansion          0.4                    0.12 What is the expected return for the asset?             What is the standard deviation of returns for the asset?

Question 5  In class, we discussed the CAPM model and its implications. What is the market portfolio? What assets does the model price? Is the S&P 500 a good proxy for the market portfolio, and if not, why? Please elaborate.