An analyst gathered the following information about a stock market index: Required rate of return: 16% Expected dividend payout ratio: 30% Expected return on equity investment: 20% The expected price-earnings (P/E) ratio of the index is closest to a. 3.5 b. 7.0 c. 15.0 d. 35.0
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- Using the data in the chart, calculate the first-period rates of return on the following indexes of the three stocks: A market-value-weighted index. An equally weighted index. stocks P0 Q0 P1 Q1 P2 Q2 A 90 100 95 100 95 100 B 50 200 45 200 45 200 C 100 200 110 200 55 400 (Pt represents price at time t, and Qt represents shares outstanding at time t.)Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.20RM + eA RB = -1.6% + 1.50RM + eB OM = 16%; R-squareд = 0.25; R-squarep = 0.15 What is the covariance between each stock and the market index? Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Do not round your intermediate calculations. Round your answers to nearest whole number. Stock A Stock B CovarianceSuppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 3.2% + 1.10RM + eA RB = -1.4 % + 1.25RM + eB OM= 30%; R-squareд = 0.28; R-squareg = 0.12 What is the covariance between each stock and the market index? Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Do not round your intermediate calculations. Round your answers to nearest whole number. Answer is complete but not entirely correct. Stock A Stock B Covariance 93 x 101 x
- VinayNikulSuppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.2RM + eA RB = -1.6% + 1.5RM + eB OM = 16%; R-squarea = 0.25; R-square; = 0.15 What is the covariance between each stock and the market index? (Calculate using numbers in decimal form, not percentages. Do not round your intermediate calculations. Round your answers to 3 decimal places.) Covariance Stock A Stock B
- The index model has been estimated using historical excess return data for stocks A, B, and C, with the following results: RA = 0.02 + 0.9RM + eA RB = 0.04 + 1.2RM + eB RC = 0.10 + 1.ORM + eC OM oM = 0.22 o(eA) = 0.21 o(eB ) = 0.11 o(eC ) = 0.23 a. What are the standard deviations of stocks A, B, and C? b. Break down the variances of stocks A, B, and C into their systematic and firm-specific components. c. What is the covariance between the returns on each pair of stocks? d. What is the covariance between each stock and the market index?An analyst fits a Single Index Model for Stock XYZ and found that Alpha is 1% and Beta is 0.5, if the return of the market is 13%, rate of return predicted for Stock is a. 7.5% b. 10% c. 13% d. 1%The index model has been estimated from the excess returns for stock A with the following results: = RA 12.00% +1.55RM+ eA °M = 24.00% σ(eд) = 18.50% What is the standard deviation of the return for stock A? (Round your answer to 2 decimal places.) Standard deviation %
- Suppose that index model for Stocks A and B is estimated from excess returns with the following results: Ra= 0.04+0.6Rm+ea, Rb= -0.04+1.3Rm+eb, Risk on the market is 30%, R-squared of A is 30%, R-squared of B is 40%, systematic risk for B is Select one: O a. 1521 O b. 1115 O c.914 O d. 1345Raghubhaia. Construct a price-weighted index for these three stocks, and compute the percentagechange in the index for the period from T to T + 1. b. Construct a value-weighted index for these three stocks, and compute the percentagechange in the index for the period from T to T + 1. c. Briefly discuss the difference in the results for the two indexes.