Question 1• An analyst has gathered P/E information on two stocks,Firm A and Form B.Market Data on Firm A and Firm BTrailing P/ELeading P/E 5-year Growth RateBeta10.0Firm A8.711.0%1.3Firm B9.0%14.012.71.411.0%Peer median13.312.11.3• Evaluate the value and P/E of each stock based on themethod of comparables.

Firm A:Firm A has a trailing PE of 10, lower than the trailing PE of peers. Also, its Leading PE of…

Answered: Question 1 • An analyst has gathered…

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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Question 06 From the following information Calculate Beta for the company ABCD Year 2015 2016 2017 2018 2019 2020 Market Return 7 9 7 -12 -7 15 ABC Stock Returns -8 -10 -9 14 10 13 Note: You may use MS. EXCEL to calculate the covariance and standard deviation. The formula to calculate Beta for stock i is as follows
What is the beta of a portfolio comprised of the following securities? Stock Amount Invested Security Beta- 0.86 1.76 1.35 A B C $3600 $ 2800 $ 9000 Beta of portfolio to 2 decimal places is Numeric Response
Give the return of the stock in which you would most likely invest and show the preferred order of the stocks if you were considering further investment, all other things being equal. Stock Beta Risk-Free Market-Rate CA-K 0.95 5.5% 9% AU-L 1.05 6% 8.5% TT-M 1.10 5% 8%
Historical Realized Rates of Return You are considering an investment in either individual stocks or a portíolio of stocks. The two stocks you are researching, Stock A and Stock B, have the folloving historical retums: Year 2015 -22.00% -4.00% 2016 34.00 17.00 2017 29.00 -15.00 2018 -2.00 46.00 2019 30.00 25.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your ansvers to two decimal places. Stock A: Stock 8: b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your ansviers to bwo decimal places. Negative values, if any, should be indicated by a minus sign. Year Portfolio 2015 2016 2017 2018 2019 Average return c. Calculate the standard deviation of returns for each stock…
Compute the portfolio risk if stock A and Stock B are combined in a portfolio in the ratio 6:4 respectively.
Compute for the Standard Deviation:
Q2 - Returns on stocks X and Y are listed below: Period 1 2 3 4 5 6 7Stock X 4% -2% 5% -1% 10% 7% 12%Stock Y -3% 7% 4% 2% 2% 8% -3% Consider a portfolio of 10% stock X and 90% stock Y. What is the mean of portfolio returns? Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).
Detailed steps pls all parts or skip
Consider the annual returns produced by two different active equity portfolio managers (A and B) as well as those to the stock index with which they are both compared: Period Manager A Manager B Index 1 12.7 % 13.5 % 11.6 % 2 -1.6 -4.5 -2.3 3 14.9 13.2 18.9 4 0.5 2.2 -0.6 5 -7.6 -6.7 -3.5 6 24.8 24.3 21.6 7 -10.7 -12.2 -13.2 8 5.2 5.5 5.1 9 2.6 4.3 2.6 10 19.1 18.3 19.3 Did either manager outperform the index, based on the average annual return differential that he or she produced relative to the benchmark? Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to two decimal places. Manager A: % Manager B: % 's average return is less than the index and 's average exceeded that of the index. Calculate the tracking error for each manager relative to the index. Which manager did a better job of limiting his or her client's unsystematic…
Estimated rate of return for Stock shareholders A B Estimated price in T1 4 4 Estimated dividend in T1 0,2 12% 15% 0,5 Calculate, for both stocks, the equilibrium price in TO. With a market rate of return of 6% and a risk free rate of 1,5%, calculate the Beta of the two stocks. Which percentage of stock A and B should you buy in your portfolio so as to generate a rate of return of 13,25%? What would be the beta of this portfolio?
Problems BETA COEFFICIENTS AND RATES OF RETURN You are given the following set of data: 8A-1 Historical Rates of Return (r) Stock Y(F,) NYSE (F.) Year 1 3.0% 4.0% 18.2 14.3 9.1 19.0 (6.0) (14.7) (15.3) (26.5) 33.1 37.2 7 6.1 23.8 3.2 (7.2) 9. 14.8 6.6 10 24.1 20.5 11 18.0 30.6 Mean 9.8% 9.8% 13.8 19.6 d. Suppose the regression line had been downward sloping and the beta coefficient had been negative. What would this imply about (1) Stock Y's relative riskiness and (2) its probable risk premium? e. Construct an illustrative probability distribution graph of returns (see Figure 8.3) for portfolios consisting of (1) only Stock Y, (2) 1% each of 100 stocks with beta coefficients similar to that of Stock Y, and (3) all stocks (i.e., the distribution of returns on the market). Use as the expected rate of return the arithmetic mean as given previously for both Stock Y and the market, and assume that the distributions are normal. Are the expected returns "reasonable"; that is, is it reasonable…
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