Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock using Capital Asset Pricing Model (CAPM)?
Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock using Capital Asset Pricing Model (CAPM)?
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
Related questions
Question
Daniel have established an investment portfolio of two stocks A and B five years ago. Required:
- Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free
rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock usingCapital Asset Pricing Model (CAPM)? - Assume that Daniel bought 3,000 stock B in the portfolio for total investment of $12,000, now the market price of the stock is $15, the dividend paid for this stock is $2 each year. Calculate the total rate of return of this stock?
- Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 35% and stock B accounts for 65% of your portfolio?
-
A
B
Expected return
19.5%
12.5%
Standard Deviation of return
7%
2.5%
Correlation of coefficient (p)
0.45
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education