Problem 12-22 Calculating Beta (LO4, CFA1) You are given the following information concerning a stock and the market: Returns Year Market 2017 14% 2018 13 2019 14 2020 -14 2021 37 2022 15 Stock 26% 29 5 a. Calculate the average return and standard deviation for the market and the stock. Note: Use Excel to complete the problem. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Average return Standard deviation Correlation Beta -23 16 24 Market % Stock b. Calculate the correlation between the stock and the market, as well as the stock's beta. Note: Use Excel to complete the problem. Do not round intermediate calculations. Round your correlation answer to 2 decimal places and beta answer to 4 decimal places. % %

Problem 12-22 Calculating Beta (LO4, CFA1) You are given the following information concerning a stock and the market: Returns Year Market 2017 14% 2018 13 2019 14 2020 -14 2021 37 2022 15 Stock 26% 29 5 a. Calculate the average return and standard deviation for the market and the stock. Note: Use Excel to complete the problem. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Average return Standard deviation Correlation Beta -23 16 24 Market % Stock b. Calculate the correlation between the stock and the market, as well as the stock's beta. Note: Use Excel to complete the problem. Do not round intermediate calculations. Round your correlation answer to 2 decimal places and beta answer to 4 decimal places. % %

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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3 pts Assume that you run a regression on the raw returns of the stock of Company J against the raw returns of the market and find an intercept of 1.324 percent and a beta of 1.50. If the risk-free rate is 2.64 percent, and using the concept of Jensen's Alpha, then determine by how much this stock beat the market. Answer in decimal format, to 4 decimal places. For example, if you answer is 3.33%, enter "0.0333".
Consider the following information on two stocks: P(State) Stock A Stock B Boom 20% 30% 20% Normal 50% 12% -5% Slow 15% 4% 8% Recession 15% -10% 10% Calculate the covariance(A,B). (Enter percentages as decimals and round to 4 decimals)
Review the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?
the following information is provided for the stock market: Expected Beta Return Alphabet 12.5% 1.5 Meta 9% 1 Yahoo ? 1.35 (a) (10 points) In the context of CAPM, calculate the expected return of Yahoo
Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 -13 2 22 % Stock Y 15% 7 -4 3 12 Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. Market 13% 12 -10 2 15
Q15
The figure in the popup window, a. The expected return. b. The standard deviation of the return. Note: Make sure to round all intermediate calculations to at least five decimal places. Graph/chart Probability (%) 35- 30- 25- 20 15- 10- 5 9 -25% shows the one-year return distribution for RCS stock. Calculate -10% 0% Return 10% 25% - Q Q 2 X
Consider the rate of return of stocks ABC and XYZ. Year 1 2 3 4 ABC XYZ ABC 22% 9 19 1 O ABC Ⓒ XYZ ABC XYZ Required: a. Calculate the arithmetic average return on these stocks over the sample period. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) XYZ 38% 11 19 -11 Arithmetic Average b. Which stock has greater dispersion around the mean return? c. Calculate the geometric average returns of each stock. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected rate of return 11.40 % 11.40 % Geometric Average Expected rate of return d. If you were equally likely to earn a return of 22%, 9%, 19%, 6%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) e. What if the five possible outcomes were those of stock XYZ? (Do not round Intermediate calculations. Round your answers to 2…
Colonel Motors (C) Separated Edison (S) Expected Return 10% 8% Standard Deviation 6% 3% Please represent graphically all potential combinations of stocks C and S, if the correlation coefficient between the returns of stocks C and S is: A) 1 B) 0 C) -1 Please report these investment opportunity sets in the corresponding Excel sheets.
4 Skipped Use the following data for Questions 3-5: Value 12500 17500 20000 Stock A B C Exp. Return 8.5% 9.2% 10.6% Beta 0.8 1.2 1.4 Question 4: What is the portfolio's Beta? ENTER YOUR ANSWER ROUNDED TO 2 DECIMAL PLACES

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