A security with a beta of 1.0 earned a return of 15%last year when the market portfolio earned a returnof only 9%. Begin your answer with Consistent orInconsistent followed by your explanation.

Beta is the measure of systematic risk which explain the movement of price of the asset with respect…

Answered: A security with a beta of 1.0 earned a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Suppose you observe the following situation: Security Ruby Pearl Expected Return 14.9% 21.0% Beta 0.70 2.13 A). If these two securities are correctly priced, calculate the risk-free rate. Round your answer to 4 decimal points. B). If these two securities are correctly priced, find the market risk premium (using the findings of Requirement-A). Round your answer to 4 decimal points. C). If the current market data shows that the risk-free rate is 3.52 percent, are these securities fairly priced? Comment on your answer. Round your answers to 4 decimal points. D). Calculate the expected return and beta of an equally weighted portfolio of these two securities. Round your answers to 3 decimal points.
What is portfolio A's CAPM beta based on your analysis? Round off your answer to three digits after the decimal points. State your answer as a percentage point as 1.234. Compute the Treynor measure for portfolio B. Round off your answer to three digits after the decimal point. State your answer as 1.234
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Suppose that stock market returns are normally distributed with a mean of 7% and a standard deviation of 20%. There should be about a 16% chance of getting a return less than _______%. Write your answer as a whole number: eg, -15% = -15.
You have been scouring PSE Edge looking for stocks that are “good values” and have calculated expected returns for five stocks. Assume that the risk-free rate is 7% and the market return is 9%. Which security would be the best investment? Choose the (1) expected return, and (2) beta of that best investment. (1) 8.01%; (2) 1.70 (1) 7.06%; (2) 0.00 (1) 4.04%; (2) -0.67 (1) 10.55%; (2) 2.50
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Assume that you are given the following historical returns for the Market and Security J. Also assume that the expected risk-free rate for the coming year is 4.0 percent, while the expected market risk premium is 15.0 percent. Given this information, determine the required rate of return for Security J for the coming year, using CAPM. Year 1 2 O21.20% 3 4 5 6 O22.34% O 23.49% O24.63% O24.10% Market 10.00% 12.00% 16.00% 14.00% 12.00% 10.00% Security J 12.00% 14.00% 18.00% 22.00% 18.00% 14.00%
Stock XYZ has a beta of 1.3 and an expected return (rs) of 6.5%. The risk-free rate (TRF) is currently 3.0%. What is the expected return on a portfolio that is 3/4 invested in Stock XYZ and 1/4 invested in the risk-free asset? Enter your answer as a decimal with a leading zero and 4 decimal places of precision (i.e. 0.1234)
The expectation of market returns is 20%, and the standard deviation is 25%. The risk-free rate is 7%. 1- Title i is on the efficiency frontier, it has an expectation of 30%, what is the standard deviation of returns? What is the correlation with the market? 2- The j-stock has an expectation of 35% and a standard deviation of 65%. What are the systematic risk and the specific risk of this security?
The risk-free rate and the expected market rate are 6% and 12%, resp. According to the CAPM, the expected rate of return on security X with a beta of 1.2 is equal to .%

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A security with a beta of 1.0 earned a return of 15% last year when the market portfolio earned a return of only 9%. Begin your answer with Consistent or Inconsistent followed by your explanation.