A stock market analyst is using a exponential smoothing and wanting to give a quick read out on a stock their firm is looking to invest in. The analyst finds that their last predicted closing price on the stock was below the actual price. What should the analyst know about their next prediction on the closing price of the stock? their next forecast will be less than the actual price their next forecast will be more than their latest prediction. O their next forecast will be greater than the actual price O their next forecast will be less than their latest prediction.

A stock market analyst is using a exponential smoothing and wanting to give a quick read out on a stock their firm is looking to invest in. The analyst finds that their last predicted closing price on the stock was below the actual price. What should the analyst know about their next prediction on the closing price of the stock? their next forecast will be less than the actual price their next forecast will be more than their latest prediction. O their next forecast will be greater than the actual price O their next forecast will be less than their latest prediction.

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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Your client is considering purchasing stocks. The actual return of one o his choices follows here. Assist him by calculating the standard deviation and advise him what the risk is. Stock 'A' Actual Returns = 6%, 12%, 8%, 10% 0.0164 0.0258 0.0542 0.1072
1. Assume stock prices follow a random walk and a particular stock has had the following recent stock prices: Day 1: 129.5 Day 2: 126.9 Day 3: 127.1 what is the best estimate of day 4 prices? 2. What is a stock's realized abnormal return if the stock had a 3% return and the stock had a Beta=1.24, an Alpha=0 and the excess market return was 3.3%. assume the risk free rate is 0%. Please use 5 decimal places in your response. Please write negative returns using the "-" symbol, so a negative 1% return would be written as -.01 2. If the yield to maturity for a two year zero coupon bond is 5.8% and the yield to maturity for a 3 year zero coupon bond is 6.1%, what is the implied future short rate from year 2 to 3 (use 5 decimal places, write 3.333% as .03333)?
Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers but it does change the expected return of the following stocks: - a. Calculate the alpha for each stock in the table. b. At current market prices, which stocks represent buying opportunities? On which stocks should you put a sell order in? a. Calculate the alpha for each stock in the table. Complete the table with the alphas below: (Round to two decimal places.) Green Leaf Expected Return Volatility 12% 20% Beta Alpha 1.50 %% Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Expected Return Volatility Beta Green Leaf 12% 20% 1.50 NatSam 10% 40% 1.80 HanBel 9% 30% 0.75 Rebecca Automobile 6% 35% 1.20 - X
A. If a stock costs $55 one month and drops to $45 the next month, what is the expected stock price the next month, if we assume the stock follows a random walk? B. Explain both technical and fundamental analysis and what form of the efficient market hypothesis corresponds to each.
Which of the following strategy would you adopt if you expect the fall in prices of a stock? A. Buy a call B. Sell a call C. Sell a put D. Buy a future
If the investor desires less risk than the market, he or she: A) buys stocks with alphas of zero. B) buys stocks with betas less than 1.0. C) makes sure the risk-free rate is higher than the expected market return. D) buys stocks only when the slope of the security market line is on a 45-degree angle.
You are analyzing a stock that has the following returns given the various states of economy. State of Economy Probability Return Recession 0.12 -7.20 Normal 0.68 6.80 Boom 0.2 15.40 What is the expected return on this stock?
An investor buys a stock if price rises 5% from the 250-day low and shorts a stock if price falls 5% from the 250-day high. What is this strategy called? Will it work if the market is efficient? Explain why
Consider the following information on Stocks I and II: State of Economy Recession Normal Irrational exuberance. Probability of State) of Econony 15 .70 .15 a. Stock I beta Stock Il beta. b. Stock I standard deviation Stock Il standard deviation Rate of Return if State Occurs. Stock I Stock II 05 18 07 The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. a. Calculate the beta of each stock. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. Calculate the standard deviation of each stock. c. More systematic nsk d. More unsystematic risk e. "Riskier stock Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskler"? -.21 .10 39 % %
A stock has not been fluctuating much in price. Its average price is $20/share. You expect that the stock price behaves the same way in the next year. A one-year put option is selling for $5, which has an exercise price of $20. Suppose the risk-free rate is 0.05. To make use of your expectation in the future price movement, you establish a straddle strategy to maximize your profits. If the stock price actually ends up at $20 in a year, your profit is $ . Give your answer to 2 decimal places.
If the current price of a stock is $30, and you believe that price changes follow a random walk, what is your best estimate for the expected price tomorrow. A) 0 B) 25 C) 30 D) 35 E) 40
Consider the following information on Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .15 .70 .15 a. Stock I beta Stock Il beta b. Stock I standard deviation Stock II standard deviation c. More systematic risk d. More unsystematic risk e. "Riskier" stock Rate of Return if State Occurs Stock I Stock II .05 .18 .07 The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. -.21 .10 .39 a. Calculate the beta of each stock. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. Calculate the standard deviation of each stock. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? % %

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