Based on Capital Asset Pricing Model (CAPM), calculate the return on market portfolio if the Nestle stock beta is 1.2 and expected market return of Nestle is 14%, while its risk-free rate is 9%. What would be the expected market return for stock of JKH if the Beta for JKH share is 0.8, average Treasury bill rate is 8% and return of market portfolio is 13%. Also, determine the nature (defensive, aggressive or neutral) of the share of XYZ, if its stock has a Beta value of 1.25, by explaining about the beta value if the stock is categorized as defensive.
Based on Capital Asset Pricing Model (CAPM), calculate the return on market portfolio if the Nestle stock beta is 1.2 and expected market return of Nestle is 14%, while its risk-free rate is 9%. What would be the expected market return for stock of JKH if the Beta for JKH share is 0.8, average Treasury bill rate is 8% and return of market portfolio is 13%. Also, determine the nature (defensive, aggressive or neutral) of the share of XYZ, if its stock has a Beta value of 1.25, by explaining about the beta value if the stock is categorized as defensive.
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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Transcribed Image Text:Based on Capital Asset Pricing Model (CAPM), calculate the return on market portfolio if the
Nestle stock beta is 1.2 and expected market return of Nestle is 14%, while its risk-free rate is
9%. What would be the expected market return for stock of JKH if the Beta for JKH share is
0.8, average Treasury bill rate is 8% and return of market portfolio is 13%. Also, determine
the nature (defensive, aggressive or neutral) of the share of XYZ, if its stock has a Beta value
of 1.25, by explaining about the beta value if the stock is categorized as defensive.
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