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A stock having a beta of 2 means
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- Suppose the beta estimated from the CAPM for stock A is 2.3 and stock B is 1.1. What is the beta of an equally weighted stock portoflio of A and B stock?Suppose the beta coefficient of a stock doubles from B1= 1.0 to B2=2.0. Logic says that the required rate of return on the stock should also double, Is this correct?According to the CAPM, a stock's expected return is positively related to its beta. True or False True False
- Ch. 13. The average beta across all stocks is___________. Format as a number.If put A has T = 0.5, X = 50, sigma = 0.2, and a price of 10, and put B has T = 0.5, X = 50, sigma = 0.2, and a price of 12, which put is written on a stock with a lower price (and why)?An ideal value-relevant attribute is one for which the correlation coefficient of the values of the attribute and the stock prices is Group of answer choices a. +2.0 b. zero c. +1.0 d. -1.0
- The beta of the market portfolio is: 1.0 0.5 -1.0When the required returns on all stocks are graphed against their corresponding betas, Question 16Answer a.we obtain the security market line b.No option is correct c.we obtain the beta d.we obtain the return lineProblem 2: You are given the following probability distribution for a stock: Pr. Outcome 4 -4% .6 12% A. Compute the expected return B. Compute the standard deviation C. Presuming the stock returns are normally distributed, what do these results indicate?
- A stock's risk premium is equal to the: expected market risk premium times beta. expected market risk premium multiplied by beta plus the risk-free return. Risk-free return plus expected market return. expected market return times beta.If a stock has a beta of 0.8, what doesthat imply about its risk relative to the market?A stock's beta coefficient can be calculated using the following equation: B₁ = Oi, m σε m a. Write a user-defined function that can calculate the beta coefficient. The argu- ments to the function should be the covariance between the stock and market returns, and the variance of the market's returns. For example, BETA (COVAR AS SINGLE, MARKET VAR AS SINGLE). b. Rewrite your function so that it accepts ranges of returns and then calcu- lates the beta directly from the returns. It should be defined as: BETA(STOCK- RETURNS AS RANGE, MARKETRETURNS AS RANGE). Your function should make use of Application. WorksheetFunction to calculate the covariance and variance (use Excel's COVAR.S and VAR.S functions). In the code, be sure to check to see if the number of stock returns is equal to the number of market returns. The function should return an error if the count of returns is not equal.
