Betas and risk rankings Personal Finance Problem You are considering three stocks-A, B, and C-for possible inclusion in your investment portfolio. Stock A has a beta of 1.5, stock B has a beta of 0.5, and stock C has a beta of -0.4. a. Rank these stocks from the most risky to the least risky. b. If you believed that the stock market was getting ready to experience a significant decline, which stock should you add to your portfolio? c. If you anticipated a major stock market rally, which stock would you add to your portfolio?

Betas and risk rankings Personal Finance Problem You are considering three stocks-A, B, and C-for possible inclusion in your investment portfolio. Stock A has a beta of 1.5, stock B has a beta of 0.5, and stock C has a beta of -0.4. a. Rank these stocks from the most risky to the least risky. b. If you believed that the stock market was getting ready to experience a significant decline, which stock should you add to your portfolio? c. If you anticipated a major stock market rally, which stock would you add to your portfolio?

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

See similar textbooks

Similar questions

(a)Jack is considering investing in the stocks. The two stocks are available with the following particulars: Stock Return %Beta Marvel 9.60.75DC8.71.3 As measured by the return on government stock, a risk-free return in the market is 3.6%.Using capital asset pricing model, Calculate: (i) The rate of return of stock Marvel (Ii) The rate of return of stock DC (iii) Which stock should Jack invest in and why? (b) Explain the advantages and limitations of capital asset pricing model (This is subpart question nor multiple questions) so I humble request please answer I give up thumb
Rate of return, standard deviation, coefficient of variation Personal Finance Problem Mike is searching for a stock to include in his current stock portfolio. He is interested in Hi-Tech Inc.; he has been impressed with the company's computer products and believes Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technology stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 1.00. Mike has obtained the following price information for the period 2015 through 2018: Hi-Tech stock, being growth-oriented, did not pay any dividends during these 4 years. a. Calculate the rate of return for each year, 2015 through 2018, for Hi-Tech stock. b. Assume that each year's return is equally probable and calculate the average return over this time period. c. Calculate the standard deviation of returns over the past 4 years. (Hint: Treat this data as a sample.) d. Based on b and c…
question 1 If an investor holds only stocks in Tencent, the relevant measure of risk will be Beta on the Tencent stock Correlation of Tencent’s return with the market return Covariance between Tencent’s return and the market return Standard deviation on Tencent’s return Explain your answer. with example
The payoff table below indicates the returns (in RM thousands) of investments in stock, bond and fixed deposit under different economic situations. Type of Investment Stock Bond Fixed Deposit Table 1 Economic Situation Good 150 50 45 Stable 60 40 45 Poor -30 36 45 The probabilities of good, stable and poor economy are 0.3, 0.5 and 0.2, respectively. What is the best investment based on the expected monetary value criterion? Draw a decision tree.
The beta coefficient A stock’s contribution to the market risk of a well-diversified portfolio is called Q1. ______risk. It can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market. Q2. Based on your understanding of the beta coefficient, indicate whether each statement in the following table is true or false: Statement True False Over time, a stock with a beta of 1.0 produces a return that goes up and down with a 1:1 relationship with the return on the market. Beta measures the volatility in stock movements relative to the market. A stock that is more volatile than the market will have a beta of less than 1.0. Q1. Option 1 Unsystematic or Option 2 Relevant. Please provide true or false answers. Thank you!
Please help correctly all or skip pls
1 The information regarding the risk level of three different stocks is presented below. 1. Which stock has the highest level of risk? Interpret the beta of that stock. 2. Which stock has the level of risk that is closest to the market level of risk? How do we measure the market level of risk? Beta Standard Deviation Flylnc 2.1 15.8% Airco 1.1 17.3% SkyCorp 0.8 21.5%
QUESTION 1 Consider the following information on stocks I and II: State of probability of Rate of Return if state Occurs state of Econ. Stock I Stock II 0.20 0.06 0.55 0.47 0.25 0.23 The market risk premium is 8%, and the risk free rate is 6%. Economy Recession Normal Boom a) Which stock has the most Systematic risk? b) Which one has the most unsystematic risk? c) Which stock is "riskier"? Explain. -0.25 0.11 0.68
pls see attached image pls show formula and solution not in spreadsheet form.
Current Attempt in Progress You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock A B C Investment $190,000 285,000 475,000 Beta of the portfolio Beta Expected rate of return 1.45 0.60 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 17 percent and that the risk-free rate is 6 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) 1.30 %
Give the return of the stock in which you would most likely invest and show the preferred order of the stocks if you were considering further investment, all other things being equal. Stock Beta Risk-Free Market-Rate CA-K 0.95 5.5% 9% AU-L 1.05 6% 8.5% TT-M 1.10 5% 8%
Historical Realized Rates of Return You are considering an investment in either individual stocks or a portíolio of stocks. The two stocks you are researching, Stock A and Stock B, have the folloving historical retums: Year 2015 -22.00% -4.00% 2016 34.00 17.00 2017 29.00 -15.00 2018 -2.00 46.00 2019 30.00 25.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your ansvers to two decimal places. Stock A: Stock 8: b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your ansviers to bwo decimal places. Negative values, if any, should be indicated by a minus sign. Year Portfolio 2015 2016 2017 2018 2019 Average return c. Calculate the standard deviation of returns for each stock…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

SEE MORE TEXTBOOKS