5. Imagine there are two risky assets and the risk-free asset of the US bond in the table below. Suppose all the assumptions of the Capital Asset Pricing Model (CAPM) are satisfied. Then answer the following questions. Shares Relative Shares Rate of Security Standard Deviation Outstanding In market Price returns Jazz Inc. 10,000 1/6 $4.50 12% 6% Classical, Inc. 20,000 1/3 $6.75 8% 2% US bonds (8] 30,000 1/2 $2.40 6% Total 60,000 (D2]: Explain the assumptions of the CAPM in three lines. |M14]: Answer the capitalization weight of Juzz Inc. in the market. b. 1/4 c. 1/3 e. 3/5 a. 1/6 d. 2/5 |M15): Answer the expected rate of return of the above market portfolio. d. 11% c. 12% a. 8% b. 9% c. 10% 3. |M16|: Answer the volatility of the market portfolio when the covariance of the stocks between Jazz Inc. & Classical Inc. is 0.002. a. 1.5% c. 3.5% d. 4.5% c. 5.5% ь. 2.5% |M17|: When you invest $1000 only into the risky assets based on CAPM. Then how much you invest into Jazz Inc. a. S100 ь. $250 c. About $333 d. S600 e. S800 |MI8): If you invest $200 into the US bond following CAPM, how much you invest into the stock of the Jazz Inc? a. $0 b. $200 c. S400 d. S600 e. $800 (D3]: Answer the equation of the Capital market line. [M19): When t covariance between the market portfolio and the stock of classical Inc. is 0.002, what is the approximate beta value of the stock classic Inc.? a. 0.057 b. 0.085 c. 1.000 d. 1.235 e. 1.632
5. Imagine there are two risky assets and the risk-free asset of the US bond in the table below. Suppose all the assumptions of the Capital Asset Pricing Model (CAPM) are satisfied. Then answer the following questions. Shares Relative Shares Rate of Security Standard Deviation Outstanding In market Price returns Jazz Inc. 10,000 1/6 $4.50 12% 6% Classical, Inc. 20,000 1/3 $6.75 8% 2% US bonds (8] 30,000 1/2 $2.40 6% Total 60,000 (D2]: Explain the assumptions of the CAPM in three lines. |M14]: Answer the capitalization weight of Juzz Inc. in the market. b. 1/4 c. 1/3 e. 3/5 a. 1/6 d. 2/5 |M15): Answer the expected rate of return of the above market portfolio. d. 11% c. 12% a. 8% b. 9% c. 10% 3. |M16|: Answer the volatility of the market portfolio when the covariance of the stocks between Jazz Inc. & Classical Inc. is 0.002. a. 1.5% c. 3.5% d. 4.5% c. 5.5% ь. 2.5% |M17|: When you invest $1000 only into the risky assets based on CAPM. Then how much you invest into Jazz Inc. a. S100 ь. $250 c. About $333 d. S600 e. S800 |MI8): If you invest $200 into the US bond following CAPM, how much you invest into the stock of the Jazz Inc? a. $0 b. $200 c. S400 d. S600 e. $800 (D3]: Answer the equation of the Capital market line. [M19): When t covariance between the market portfolio and the stock of classical Inc. is 0.002, what is the approximate beta value of the stock classic Inc.? a. 0.057 b. 0.085 c. 1.000 d. 1.235 e. 1.632
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
What is the answer for M19?
![5. Imagine there are two risky assets and the risk-free asset of the US bond in the table below.
Suppose all the assumptions of the Capital Asset Pricing Model (CAPM) are satisfied. Then
answer the following questions.
Shares
Relative Shares
Rate of
Standard
Deviation
Security
Outstanding
In market
Price
returns
Jazz Inc.
10,000
1/6
$4.50
12%
6%
Classical, Inc.
20,000
1/3
$6.75
8%
2%
[8]
US bonds
30,000
1/2
$2.40
6%
Total
60,000
1
[D2]: Explain the assumptions of the CAPM in three lines.
[M14]: Answer the capitalization weight of Juzz Inc. in the market.
ь. 14
c. 1/3
1/6
d. 2/5
e. 3/5
a.
|M15): Answer the expected rate of return of the above market portfolio.
d. 11%
8%
b. 9%
10%
c. 12%
a.
с.
3.
ĮM16): Answer the volatility of the market portfolio when the covariance of the stocks
between Jazz Inc. & Classical Inc. is 0.002.
a. 1.5%
c. 3.5%
c. 5.5%
b. 2.5%
d. 4.5%
(M17]: When you invest $1000 only into the risky assets based on CAPM. Then how much
you invest into Jazz Inc.
a. S100
c. About $333
c. $800
b. $250
d. $600
[M18]: If you invest $200 into the US bond following CAPM, how much you invest into the
stock of the Jazz Inc?
a. so
b. S200
c. $400
e. $800
d. $600
[D3]: Answer the equation of the Capital market line.
[M19|: When the covariance between the market portfolio and the stock of classical Inc. is
0.002, what is the approximate beta value of the stock classic Inc.?
a. 0.057
b. 0.085
c. 1.000 d. 1.235 e. 1.632](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1077e2db-e230-4539-af72-4ff36b7e393b%2F61bdd225-bf8d-4657-8234-f5dd3ce8f17f%2F81ti17n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5. Imagine there are two risky assets and the risk-free asset of the US bond in the table below.
Suppose all the assumptions of the Capital Asset Pricing Model (CAPM) are satisfied. Then
answer the following questions.
Shares
Relative Shares
Rate of
Standard
Deviation
Security
Outstanding
In market
Price
returns
Jazz Inc.
10,000
1/6
$4.50
12%
6%
Classical, Inc.
20,000
1/3
$6.75
8%
2%
[8]
US bonds
30,000
1/2
$2.40
6%
Total
60,000
1
[D2]: Explain the assumptions of the CAPM in three lines.
[M14]: Answer the capitalization weight of Juzz Inc. in the market.
ь. 14
c. 1/3
1/6
d. 2/5
e. 3/5
a.
|M15): Answer the expected rate of return of the above market portfolio.
d. 11%
8%
b. 9%
10%
c. 12%
a.
с.
3.
ĮM16): Answer the volatility of the market portfolio when the covariance of the stocks
between Jazz Inc. & Classical Inc. is 0.002.
a. 1.5%
c. 3.5%
c. 5.5%
b. 2.5%
d. 4.5%
(M17]: When you invest $1000 only into the risky assets based on CAPM. Then how much
you invest into Jazz Inc.
a. S100
c. About $333
c. $800
b. $250
d. $600
[M18]: If you invest $200 into the US bond following CAPM, how much you invest into the
stock of the Jazz Inc?
a. so
b. S200
c. $400
e. $800
d. $600
[D3]: Answer the equation of the Capital market line.
[M19|: When the covariance between the market portfolio and the stock of classical Inc. is
0.002, what is the approximate beta value of the stock classic Inc.?
a. 0.057
b. 0.085
c. 1.000 d. 1.235 e. 1.632
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