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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Answer final 2
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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
Compute for the Standard Deviation:
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…
Consider the following information: Rate of return State of Economy Probability Stock A Stock B Recession 0.30 -40% 6% Normal 0.50 18% 4% Воom 0.20 142% 2% [Note: take full decimal places in the middle steps and round your FINAL answer to 2 decimal places (i.e. S1.23 or 1.23%)] (a) Calculate the expected return for the two Stocks A and B respectively. (in %) (b) Calculate the standard deviation for the two Stocks A and B respectively. (in %) (c) If you have $2 million to invest in a stock portfolio and your goal is to create a portfolio with an expected return of 16.92%, how much money will you invest in Stock A and Stock B respectively? (d) Based on your answer in part (c), calculate the standard deviation for the portfolio. (in %) (e) If enough stocks (i.e. 100 randomly selected stocks) had been included in the portfolio, what happen to the standard deviation for the portfolio? Explain. [within 100 words]

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