Federico wants to calculate the expected rate of return for security for his work as a freelance investment banker. He has the following figures to calculate CAPM: the risk-free interest rate is 4%, the expected return of the market is 17%, and the risk index of the security is 1.40.
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- Mr. Karim is an investment banking analyst at Benchmark Financial, and hewants to calculate the expected rate of return for a security. He finds that thesystematic risk “b” of the security is 1.2. He also knows that the risk-free rateis 3%, and the expected return of the market is 12%. Mr. Karim uses the CAPMmodel to calculate the expected rate of return and determine if theinvestment should be undertaken. Please show the computation as perdecision taken by Mr. Karim.Compute the expected rate of return of Miss Dimaano considering her security for her work as a freelance investment banker based on the following figures: Risk free rate = 4%; Expected return of the market = 12%; Systematic risk b of the security = 1.3.1) a. You approach your broker to borrow money against securities held in your portfolio. Eventhough the loan will be secured by the securities in your portfolio, the broker's rate for lending tocustomers is 5 percent. Assuming a risk-free rate of 4 percent and an expected market return of 11percent with a standard deviation of 15 percent, draw the capital market line related to yourinvestment opportunities. b. Estimate your expected return and risk if you invest 20 percent of your portfolio in the risk-freeasset. What if you decide to borrow 20 percent of your initial wealth and invest the money in themarket?
- (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.10 −6 % 0.35 4 % 0.45 5 % 0.10 10 % (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The investment's expected return is enter your response here%. (Round to two decimal places.)(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.3 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.05 −4 % 0.50 1 % 0.40 7 % 0.05 8 % (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The investment's expected return is enter your response here %. (Round to two decimal places.) Part 2 b. The investment's standard deviation is enter your response here %. (Round to two decimal places.) Part 3 c. Should Gautney invest in this security? (Select the best choice below.) A. No. B. J. Gautney Enterprises should not invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill. B. Yes. B. J.…(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 3.9 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.20 −5 % 0.50 4 % 0.10 5 % 0.20 8 % (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The investment's expected return is enter your response here%. (Round to two decimal places.) b. the investment's standard devation is? round 2 decimal places c. should gautney invest in this security?
- (Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Return -6% 3% 7% 9% Probability 0.05 0.35 0.55 0.05 (Click on the icon in order to copy its contents into a spreadsheet.) a. The investment's expected return is ... %. (Round to two decimal places.)(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.6 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Return -4% 1% 6% 0.05 8% (Click on the icon in order to copy its contents into a spreadsheet.) Probability 0.05 0.35 0.55 a. The investment's expected return is 3.85%. (Round to two decimal places.) b. The investment's standard deviation is%. (Round to two decimal places.) C(Expected return and risk) Universal Corporation is planning to invest in a security that has several possible rates of return. Given the probability distribution of returns in the popup window, , what is the expected rate of return on the investment? Also compute the standard deviation of the returns. What do the resulting numbers represent? a. The expected rate of return on the investment is ☐ %. (Round to two decimal places.) b. The standard deviation of the returns is %. (Round to two decimal places.) c. What do the resulting numbers represent? (Select the best choice below.) ○ A. Universal could expect a return of 8.75 percent with a 67 percent possibility that this return would vary up or down by 8.04 percent. B. Universal could expect a return of 8.04 percent with a 67 percent possibility that this return would vary up or down by 8.75 percent. C. Universal could expect a return of 8.75 percent with a 25 percent possibility that this return would vary up or down by 8.04 percent.…
- (Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security One-year Treasury bills are currently paying 3.1 percent. Calculate the investment's expected return and its standard deviation Should Gautney invest in this security? Probability 0.10 0.50 Return -6% 1% 5% 9% 0.30 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) CID a. The investment's expected return is%. (Round to two decimal places)With the assistance of an annotated graph, explain when a security is overpriced, under-priced or fairly priced according to the Capital Asset Pricing Model., when the calculated expected rate of return of a security is 12.2% and the actual expected rate of return on a security is 10%.a) Suppose the risk-free rate is 7% and the expected rate of return on the market portfolio is 10%. In your view, the expected rate of return of a security is 12.2%. Given that this security has a beta of 1.4, do you consider it to be overpriced, under-priced or fairly priced according to the Capital Asset Pricing Model? Please provide the details of your calculations b) explain when a security is overpriced, under-priced or fairly priced according to the Capital Asset Pricing Model.