Manipulating CAPM Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems.a. Find the required return for an asset with a beta of 1.63 when the risk-free rate and market return are 5% and 13%, respectively.b. Find the risk-free rate for a firm with a required return of 14.363% and a beta of 1.07 when the market return is 14%.C. Find the market return for an asset with a required return of 9.045% and a beta of 1.57 when the risk-free rate is 3%.d. Find the beta for an asset with a required return of 10.255% when the risk-free rate and market return are 6% and 9.7%, respectively.a. The required return for an asset with a beta of 1.63 when the risk-free rate and market return are 5% and 13%, respectively, is %. (Round to two decimal places.)

The capital asset pricing model describes the relationship between systematic risk and the expected…

Answered: Manipulating CAPM Use the basic…

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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Similar questions

What capital budgeting rule is a simple but imperfect attempt to solve the capital rationing problem? a The profitability index b The accounting rate of return c The payback rule d The internal rate of return e The net present value rule
According to the capital asset pricing model, assets with Lower; lower; unsystematic Higher; higher, unsystematic Lower; higher; unsystematic Higher; higher; systematic Higher; lower; systematic betas have expected returns because betas quantify the degree of risk. Please fill in the blank.
The internal rate of return equals the rate that yields a profitability index of 1 for an investment. True O False
What ROI will equate the PV of Inflows and the PV of outflows? a. Internal rate of return (IRR) b. Cost of capital rate c. The desired rate of return d. The minimum rate of return.
Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Risk-free rate, RF 1% The required return for the asset is %. (Round to two decimal places.) C Market return, m 5% Beta, b 0.5
The Capital Asset Pricing Model (CAPM) describes a relationship between the expected return of,,, a)An individual share and its variance risk b)An individual share and its standard deviation risk c)An individual share and its undiversifiable risk d)An individual share and its diversifiable risk
(b) Find the time path of capital K(t) given the following rates of net investment flow functions (i) I(t) = 10t2 +5 K(0) = 50 (ii) I(t) = 18t5 - 2 K(0) = 24 (iii) I(t) = 30t4 K(0) = 35 %3D (iv) I(t) = 23t K(0) =15
Explain the meaning and differences between the correlation coefficients “p” in the traditional portfolio and the beta “B” coefficients in the capital asset pricing model (CMPL) approach
Manipulating CAPM Use the basic equation for the capital asset priding model (CAPM) to work each of the following problems. a. Find the required return for an asset with a beta of 1.63 when the risk-tree rate and market return are 5% and 13%, respectively b. Find the risk-free rate for a firm with a required return of 14.363% and a beta of 1.07 when the market return is 14%. C. Find the market return for an asset with a required return of 9.045% and a beta of 1.57 when the risk-free rate is 3%. d. Find the beta for an asset with a required return of 10.255% when the risk-free rate and market retum are 6% and 9.7%, respectively a. The required return for an asset with a beta of 1.63 when the risk-free rate and market return are 5% and 13%, respectively, is % (Round to two decimal places.)
Please step by step solutions
i. What are the assumptions underlying the CAPM? ii. What is meant by the market portfolio?iii. Sketch the capital market line and the efficient frontier when borrowing and lending rates are equal. Label the axes and important points of your sketch. iv. Do the same for the Security Market Line v. Would you expect firms with high operating leverage to have higher betas?Explain! Step by step correct answer
can you draw a profit diagram of the portfolio above and state any assumptions that must be made. Also, is the cost of the portfolio positive?

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