If the simple CAPM is valid and all portfolios are priced correctly, which of thesituations below is possible? Consider each situation independently, and assume therisk-free rate is 5%.A)PortfolioAMarketB)AMarketPortfolio Expected ReturnAMarketExpected ReturnD)15%15%Portfolio Expected ReturnPortfolio20%15%20%15%Expected ReturnA30%Market 15%All options are possible.Option AOption DOption BOption C1.21.0Beta1.21.0Beta12%20Beta2.51.0Beta

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A) Portfolio A Market B) Portfolio Portfolio Expected Return A Market A Market D) Expected Return Portfolio 15% 15% 20% 15% Expected Return 20% 15% Expected Return A 30% Market 15% All options are possible. Option A Option D Option B Option C Beta 1.2 1.0 Beta 12% 20 Beta 1.2 1.0 2.5 1.0 Beta

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A) Portfolio A Market B) Portfolio Portfolio Expected Return A Market A Market D) Expected Return Portfolio 15% 15% 20% 15% Expected Return 20% 15% Expected Return A 30% Market 15% All options are possible. Option A Option D Option B Option C Beta 1.2 1.0 Beta 12% 20 Beta 1.2 1.0 2.5 1.0 Beta

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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Construct a hedge portfolio and by using the binomial option pricing model and find the values of Pu and Pd; and P. Explain the answer and describe the hedge portfolio. A stock currently priced at $100. One period later it can go up to $125, an increase of 25 percent, or down to $80, a decrease of 20 percent. Assume a put option is available with an exercise price of $100. Consider the example in a two-period world. The risk-free rate is 7 percent. The inputs are summarized as follows S = 100 d = 0.80 u = 1.25 X= 100 r = 0.07
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If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A) B) Portfolio A Market A Market C) Expected Standard Portfolio Return Deviation 23% 11% 18% 19% Expected Return A 20% 20% Expected Portfolio Return 23% 18% Market Beta 1.1 1.0 Beta 1.1 1.0
H2. Using the Black-Scholes model (BSOPM), compute the standard deviation that is implied by the following call option data as: the time to the option's maturity is 0.25 years, the price of the underlying option asset is RM30, the continuously compounded risk-free interest rate is 0.12. the exercise or striking price is RM30, and the cost or premium of the call is RM1.90.

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