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%, respectivelyb. 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%, respectivelya. 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.)

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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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The Capital Asset Pricing Model (CAPM). Write the financial model assumptions, equations, descriptions and financial meaning of each parameters and / or variables, and critique of the model and any idea to improve the model
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
The Sharpe ratio Select one: O is computed using idiosyncratic risk only is computed using systematic risk only Ois maximized for the risk-free asset is the highest for a minimum variance portfolio is the same along the capital market line
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 1.48 when the risk-free rate and market return are 8% and 13%, respectively. b. Find the risk-free rate for a firm with a required return of 14.684% and a beta of 1.47 when the market return is 12%. c. Find the market return for an asset with a required return of 12.040% and a beta of 0.95 when the risk-free rate is 5%. d. Find the beta for an asset with a required return of 13.312% when the risk-free rate and market return are 10% and 12.3%, respectively. C a. The required return for an asset with a beta of 1.48 when the risk-free rate and market return are 8% and 13%, respectively, is %. (Round to two decimal places.)
The minimum acceptable rate of return for an investment decision is called the;
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
In order to create an efficient set of portfolios thru optimization using concepts from Markowitz portfolio theory, you would need to forecast only 2 variables including expected return and standard deviation or variance for the asset classes or securities in focus. True or false
1. Fill the parts in the above table that are shaded in yellow. 2.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.
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?
Help pls
explain 1. inefficient and efficient portfolio 2. min risk per unit of return and max risk per unit of return 3. expected return 4. required rate of return

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