Finance State Probability Stock ABC Stock DEF Depression .3 -.10 - .05 Normal .3 .10 .12 Boom .4 .16 .08 What is the correlation between Stock ABC and Stock DEF? What is the standard deviation of return for Stock DEF? What is the expected return for Stock ABC? show how to solve this and answer
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Finance
State Probability Stock ABC Stock DEF
Depression .3 -.10 - .05
Normal .3 .10 .12
Boom .4 .16 .08
What is the correlation between Stock ABC and Stock DEF?
What is the standard deviation of return for Stock DEF?
What is the expected return for Stock ABC?
show how to solve this and answer
Note:-
- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
- Do not provide Excel Screet shot rather use tool table
- Answer completely.
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- Fundamental analysis is a method of______________________________to determine intrinsic value of the stock.a. Measuring the intrinsic value of a security using the market indexb. Using qualitative and quantitative factorsc. Using statistical analysis such as standard deviation, coefficients and probabilitiesd. Using historical price movementse. B and C onlylooking for help solving standard deviation for stock x and stock y, preferably with instructions on how to solve in excel.1. Calculate the Expected Return, Standard Deviation, and Beta for each stock. 2. Which stock has more systematic risk and which one has more unsystematic risk? Which stock is "riskier"? Explain your answer completely. Use excel to show formulas and calculations
- Exercises: a. The standard deviation of returns is 0.30 for Stock A and 0.20 for Stock B. The covariance between the returns of A and B is 0.006. The correlation of returns between A and B is: b. Explain the differences between systemic risk and unsystematic risk, give additional examples c. Compare and contrast the Capital Market Line and Security Market Line d. The covariance of the market's returns with the stock's returns is 0.008. The standard deviation of the market's returns is 0.08, and the standard deviation of the stock's returns is 0. 11. What is the correlation coefficient of the returns of the stock and the returns of the market? e. According to the CAPM, what is the required rate of return for a stock with a beta of 0.7, when the risk-free rate is 7% and the expected market rate of return is 14%Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Question 2Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graphQuestions: a. Compute the expected return for stock X and for stock Y b. Compute the standard deviation for stock X and for stock Y. c. Determine the best course to take for investing.
- What could you comment on this statement? "Caution is warranted when using PE ratio to value stocks"USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Stock Rit Rmt ai Beta C 12 10 0 0.8 E 10 8 0 1.1 Rit = return for stock i during period t Rmt = return for the aggregate market during period t What is the abnormal rate of return for Stock C during period t using only the aggregate market return (ignore differential systematic risk)?The slope of a regression line when the return on an individual stock's returns are regressed on the return on the market portfolio, would be: OAR BR-₁ B OC none of the answers listed here. ODO im
- Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML?d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph Please answer A, B, C & DWhen estimating the cost of equity by use of the CAPM, three potential problems are (1) whether to use long-term or short-term rates for rRF, (2) whether or not the historical beta is the beta that investors use when evaluating the stock, and (3) how to measure the market risk premium, RPM. These problems leave us unsure of the true value of rs. a. true b. falseT/F. The “Fear Index” is calculated using estimates of implied volatility. Group of answer choices True False