One way to measure risk is with standard deviation, as we saw before with asset classes. This method ofmeasuring risk can be demonstrated by using a chart of the returns for FedEx (a global shipping andlogistics company), Netflix (an internet streaming video company), and the broader stock market index.160.00140.00120.00100.0080.0060.0040.0020.000.00FedEx vs Netflix vs S&P 500 9/2015 10/2016OCTOCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP2015 2015 2015 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016> Access image detailsFedExNetflixS&P 500QWhat stands out about this picture? Share three observations about this picture.

The return graph shows the performance of a security over a period. It reflects the rise or fall in…

One way to measure risk is with standard deviation, as we saw before with asset classes. This method of measuring risk can be demonstrated by using a chart of the returns for FedEx (a global shipping and logistics company), Netflix (an internet streaming video company), and the broader stock market index. 160.00 140.00 120.00 FedEx vs Netflix vs S&P 500 9/2015 10/2016 - ***222*****

One way to measure risk is with standard deviation, as we saw before with asset classes. This method of measuring risk can be demonstrated by using a chart of the returns for FedEx (a global shipping and logistics company), Netflix (an internet streaming video company), and the broader stock market index. 160.00 140.00 120.00 FedEx vs Netflix vs S&P 500 9/2015 10/2016 - *222***

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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13. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percent) REQUIRED RATE OF RETURN (Percent) 20.0 16.0 20 12.0 16 8.0 12 4.0 0 0 CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's betal Required rate of return on Happy Corp. stock 0 Happy Corp.'s new required rate of return is F 0.6, 7.6 HC's Stock ☐ 0.5 An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.'s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst's prediction. 0 1.0 RISK (Beta) Tool tip: Mouse over the…
Netflix common stock has a beta, b, of 1.3. The risk-free rate is 5%,and the expected market return is 11%. a. Determine the risk premium on Netflix common stock. b. Determine the required return that Netflix common stock should provide. c. Determine Netflix's cost of common stock equity using the CAPM.
3. Assume that the market is in equilibrium and that stock betas can be estimated with historical data. The returns on the market, the returns on United Fund (UF), the risk-free rate (7.00%), and the required return on the United Fund (15.00%) are shown below. Based on this information, what is the required return on the market, ? Year 2011 2012 2013 2014 2015 Market -9% 11% 15% 5% -1% UF -14% 16% 22% 7% -2%
The following information is related to X corporation: X's Beta was 1.3, market index 1 January 2020 was 100, market index 31 December 2020 was 110 and interest on treasury bills was 0.03 (risk free). Stock returns using the capital assets pricing model Question 20Answer a. 0.132 b. 0.143 c. 0.112 d. 0.121
You are an investment analyst at an asset management firm. Your colleague, the in-house economist, has analyzed all the risky securities in your economy - A, B and C. He provides you with the following statistics: Securities Expected Returns Standard Deviation 0.35 0.25 0.18 A B C 0.15 0.10 0.075 0.03 Risk-Free The Correlation between A and B is 0.2, between B and C is 0.5, and between A and C is 0.3. The prevailing risk-free rate is 3%. What is the Sharpe ratio of the market portfolio in this economy?
14. Risk free asset, the market, and stock X have the expected returns of 2%, 8%, and 12% respectively. If X and the market has a covariance of 0.1503, what is the risk level of the market (as it is measured by the standard deviation)?
11. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: CAPM Elements Value Risk-free rate (rRFrRF) ________? Market risk premium (RPMRPM) __________? Happy Corp. stock’s beta ___________? Required rate of return on Happy Corp. stock ___________? An analyst believes that inflation is going to increase by 3.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML.
Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.25 .87 Expected Return 1080 .0820 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return on market using Pete Corporation a. Expected return on market using Repete Company b. Risk-free rate de de % % %
I need help with C
Which of the following firms: ANY ال لا لا لا لا لا Fem & year Expected (BIT Firm A, business Firm A, financial Frim B, business Firm B, financial is subject to a lower EWIT Fum Risk? Expected EBIT in
Please answer both QUESTION 7 According to the capital asset pricing model (CAPM), fairly priced securities should have A. A non-zero alpha. в.A fair return based on the level of systematic risk. C. A fair return based on the level of unsystematic risk. D.A beta of 1. QUESTION 8 Diversification can increase fair return. True False

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