Considering these data where 'P1' estimates are analyst forecasts offuture stock prices:Stock POABCD48.525572733.95 394047Market Risk Premium 0.0525T-bill rate 0.040.05544Assuming the analyst forecast is correct, what is the abnormal return(alpha) relative to the CAPM E(r) for Stock: D?0.053520.05100P10.046260.04863σ B0.182.40.41.10.2 1.30.26 1.6MAGANIAMBIE

Considering these data where 'P1' estimates are analyst forecasts of future stock prices: Stock PO A 48.5 BE C P1 O В 57 25 27 33.95 39 40 47 D Market Risk Premium 0.0525 T-bill rate 0.04 Assuming the analyst forecast is correct, what is the abnormal return (alpha) relative to the CAPM E(r) for Stock: D? 0.05544 O 0.05352 0.05100 0.18 2.4 0.4 1.1 0.2 1.3 0.26 1.6 0.04626 0.04863

Considering these data where 'P1' estimates are analyst forecasts of future stock prices: Stock PO A 48.5 BE C P1 O В 57 25 27 33.95 39 40 47 D Market Risk Premium 0.0525 T-bill rate 0.04 Assuming the analyst forecast is correct, what is the abnormal return (alpha) relative to the CAPM E(r) for Stock: D? 0.05544 O 0.05352 0.05100 0.18 2.4 0.4 1.1 0.2 1.3 0.26 1.6 0.04626 0.04863

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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Questions: Refer to the data of Omani common stock at below table, answer the following questions: Calculate the required rate of return (RRR) of stock. If beta coefficient decreases from 1.5 t0 0.5, what is the affect required rate of return. Build a theoretical framework depends on result of above questions. Beta Coefficient Stock Market Return Risk-free Return 1.5 10% 6%
Problem 1 You are given the following information about stock X and the market portfolio, M: Riskless Asset (f) Stock X Market Portfolio (M) E(r) 0.04 (4%) ? 0.10 σ 0.00 0.30 0.20 You are not given the expected return of stock X. The correlation of the returns on the stock X and the market portfolio is equal to 0.4. a) What is the beta (6) of stock X? b) Assuming the CAPM holds, what is the expected return on stock X? c) You have $1,000 to invest in some combination of the risk-free asset, stock X, and the market portfolio. You are thinking of investing $300 in the risk free asset, $400 in stock X, and $300 in the market portfolio. What is the overall expected return, standard deviation and beta of this portfolio?
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(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return0.20 10% 0.15 -4% 0.60 16% 0.35 7%0.20 21% 0.35 13% 0.15 20% a) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock A? What is the standard deviation? b. Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock B? What is the standard deviation? c. Based on the risk (as measured by the standard deviation) and return of each stock, which…
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Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Recession 21 .06 21 Normal 58 109 08 Boom 21 14 25 a. Calculate the expected return for Stocks A and B. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round Intermedlate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Stock A expected return a. Stock B expected return b. Stock A standard deviation b. Stock B standard deviation 196 96 96 %
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Given the following for Stocki: PO Bi rf 47.50 2.20 0.0600 E(rM) 0.1250 Before the bad news is interpreted to a beta, the stock drops at the open from 47.5 to 46.15. What is the market's perceived new risk for the stock as measured by beta, assuming it could still rise to the P1 target calculated using the CAPM? O 2.741 2.622 O2.443 O 2.355 2.881
Consider the following stocks and pick the best answer. Standard Stock Beta Deviation A 25% 1.25 35% 1.15 28% 1.85 Stock C is likely to provide the lowest expected return Stock B is likely to provide the highest expected return Stock A is likely to provide the highest expected return Stock A is likely to provide the lowest expected return O Stock B is likely to provide the lowest expected return

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