(a) Stocks A and market have the following estimated retuns:RARMyear2018-18%-24%201944%24%2020-22%-4%202122%8%202234%56%Required to(1)Calculate the expected rate of return for stock A and Market during the 5-year period.(ii) Now calculate the total risk of stock A and Market

Expected rate of return refers to the amount of interest that is received in investment in future .…

(a) Stocks A and market have the following estimated returns: RA RM year 2018 -18% -24% 2019 44% 24% 2020 -22% -4% 22% 34% 2021 8% 2022 56% Required to @Calculate the expected rate of retun for stock A and Market đuring the 5-year period. (i1) Now calculate the total risk of stock A and Market

(a) Stocks A and market have the following estimated returns: RA RM year 2018 -18% -24% 2019 44% 24% 2020 -22% -4% 22% 34% 2021 8% 2022 56% Required to @Calculate the expected rate of retun for stock A and Market đuring the 5-year period. (i1) Now calculate the total risk of stock A and Market

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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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

(a) Stocks A and market have the following estimated retuns:
RA
RM
year
2018
-18%
-24%
2019
44%
24%
2020
-22%
-4%
2021
22%
8%
2022
34%
56%
Required to
(1)Calculate the expected rate of return for stock A and Market during the 5-year period.
(ii) Now calculate the total risk of stock A and Market

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