Ex PostMarketObservations Return1-5.7%212.0%310.1%420.7%517.9%The risk-free rate is expected to be 6 percent for the coming period, and the best guess of themarket's expected return is its historical average. What is the best estimate of Security J's beta,assuming that CAPM is correct?O 1.401.25O 1.55O 1.70Security JReturn-10.6%25.5%15.2%22.8%26.3%1.85

Beta refers to a measurement of the changes in the stocks compared to the changes being made in the…

Answered: Ex Post Observations 1 2 3 4 5 O 1.40…

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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Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% Q) If you are only willing to make an investment with a standard deviation of 7.0%, is it possible for you to earn a return of 7.0%?
Consider the following information: Standard Deviation Beta Security C Security K Which security will have a higher expected return? Oa. C O b. K 20% 30% 1.25 0.95 A Oc Both securities will have the same expected return Od. Insufficient information to answer the question
Suppose you have the following inputs: • TSX/S&P Return 20 • MSCI -World Index Retun 18 • Variance of the Canadian index =30 • Variance of the World index = 26 • Correlation coefficient p = ,60 • Risk free = 2 Assume that the weight on the optimal portfolio is .554 for the TSX. And that the standard deviation of the optimal portfolio is 4.76 The extra return the investor would receive by investing in the optimal portfolio but maintaining the same level of risk associated with the domestic (Canadian) market (TSX) would be approximately (i.e. closest to). O A. 1.42 O B. 22% c. 1.21 % O D. 1.69 Resel Selecion
11f
The following represents the probability distribution for the rates of return for next month: Probability 1/6 2/6 2/6 1/6 Portfolio Market M P (%) (%) -20 -5 -5 +5 +10 0 +50 +10 What is the market beta of P?
30 - With reference to the Security Market Line, assume for the current time period the Risk-Free Rate = 3.50% while the Expected Return on the “Market Portfolio” = 9.00% so that the Market Risk Premium = 5.50%. If the supply of the Risk-Free Asset decreases for the next period, while investor demand remains unchanged, the Risk-Free Rate would be expected to: Increase in the second period. Decrease in the second period. Remain Unchanged in the second period. Cannot be determined. None of the above answers is correct.

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