Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock Csplits two-for-one in the last period.ABCPe864692Rate of returnDivisorQ0100200200P19141102Rate of returnRequired:a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0 to t= 1). (Do not roundintermediate calculations. Round your answer to 2 decimal places.)4.14 %91100200200P2914151b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2decimal places.)2%92100200400c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t = 2).

StockP0Q0P1Q1P2Q2A $ 86.00100 $ 91.00100 $ 91.00100B $ 46.00200 $ 41.00200 $ 41.00200C…

Consider the three stocks in the following table. Pt represents price at time t, and Qt represents splits two-for-one in the last period. ABU B C Pe 86 46 92 Rate of return Divisor Qo 100 200 200 P1 91 41 102 Rate of return Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t intermediate calculations. Round your answer to 2 decimal places.) 4.14 % 91 100 200 200 P2 02 91 100 41 51 b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate cal decimal places.) 2% 200 400 c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t=2).

Consider the three stocks in the following table. Pt represents price at time t, and Qt represents splits two-for-one in the last period. ABU B C Pe 86 46 92 Rate of return Divisor Qo 100 200 200 P1 91 41 102 Rate of return Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t intermediate calculations. Round your answer to 2 decimal places.) 4.14 % 91 100 200 200 P2 02 91 100 41 51 b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate cal decimal places.) 2% 200 400 c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t=2).

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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Suppose rRF = 4%, rM = 11%, and bi = 1.5. What is ri, the required rate of return on Stock i? Round your answer to two decimal places. % 1. Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will decrease by 1%. Both rM and ri will remain the same. Both rM and ri will increase by 1%. rM will remain the same and ri will increase by 1%. rM will increase by 1% and ri will remain the same.
Am. 132.
Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(rA.s) E(rB,s) -0.1 0.04 0.08 0.05 0.13 0.07 Recession 0.2 Normal 0.5 Expansion 0.3 Part 1 What is the expected return for stock A? 3+ decimals Submit
Consider the rate of return of stocks ABC and XYZ. Year 1 2 3 4 ABC XYZ ABC 22% 9 19 1 O ABC Ⓒ XYZ ABC XYZ Required: a. Calculate the arithmetic average return on these stocks over the sample period. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) XYZ 38% 11 19 -11 Arithmetic Average b. Which stock has greater dispersion around the mean return? c. Calculate the geometric average returns of each stock. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected rate of return 11.40 % 11.40 % Geometric Average Expected rate of return d. If you were equally likely to earn a return of 22%, 9%, 19%, 6%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) e. What if the five possible outcomes were those of stock XYZ? (Do not round Intermediate calculations. Round your answers to 2…
pm.3
Suppose rRF = 6%, rM = 12%, and bi = 1.1. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. 2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. 1. Now assume that rRF remains at 6%, but rM increases to 13%.…
Assume the expected return on the market is 18 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 2.00? (Round answers to 2 decimal places, e.g. 0.25.) Expected return What is the market risk premium
A stock's beta is 1.5 and the market risk premium is 5.6%. If the risk-free rate is 2.9%, what is the stock's required return according to CAPM? Answer as a percent and round to 2 decimal places. Answer:
Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ 1 22 % 34 % 2 12 12 3 14 18 4 7 0 5 1 −8 1. If you were equally likely to earn a return of 22%, 12%, 14%, 7%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations.) 2. What if the five possible outcomes were those of stock XYZ? 3. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance? A. Arithmetic B. Geometric
1. 1- Calculate the beta adjusted by the degree of freedom for stock X relative to the equity market using the information from the table (performance): A B 0.82 1.22 42.07 Year 1 2 3 4 5 6 7 None of the options is true X -7 -11 21 15 8 9 -2 Market 7 15 20 17 10 7 -1
You are given the following expected returns for a share under various scenarios. Scenario Probability Expected returnBoom16 % 34.6%Normal41 % 4.4% Recession 43% - 5.2% Calculate the expected return as a percent. Please enter the number as a percentage without the % sign (as you do for the interest rate in the calculator). For example, if your answer is 7.89%, then simply answer "7.89".
Use the following information: Stock A B Good state 10% 14% Bad state 2% -2% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the standard deviation of stock A? (Please use 5 decimal places, this should be written in percentage, so an answer of 23.143% should be written as .23143)

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