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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Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period. A B с Po 81 41 82 Rate of return 20 100 200 200 Divisor P1₁ 86 36 92 21 100 200 200 Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t= 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.) % P2 86 36 46 Q2 100 200 400 b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Question 6 Consider a market in which the returns on common stocks are described by the Fama-French Three Factor Model. The following table gives the factor sensitivities of Orange, Inc, Fallmart, and Vesla| Inc. stocks to each of the three factors. Security BSp500 BSMB Sensor, Inc. 1.5 -1.5 Contravent, Inc. 0.5 0.5 -0.5 Cosmo, Inc. 1.3 1.1 -0.8 a. Consider a portfolio, made up by selling short $10,000 of Contravent stocks and buying $10,000 of Sensor and $5000 of Cosmo. How sensitive will this portfolio be to each of the three factors? b. What is the expected return of your portfolio in (a) if the expected return on the S&P 500 index is 15%, the expected return on the SMB factor is 4%, the expected return on the HML factor is 2% and the risk free rate is 0.5% c. What is the systematic volatility (standard deviation of returns) of your portfolio in (a) given that the volatility of the S&P 500 index is 16%, the volatility of the SMB factor is 20% and the volatility of HML factor is 10%?
a. what is return on each of the three shortlisted stock? and what is the standard deviation of the rate of return on the three shortlisted stocks?
9
Provide Answer with calculation and explanation
Subject: Financia; strategy & policy Question No 2 (part i) Answer the following. i) Consider the following information for three stocks, Stocks X, Y, and Z. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected return Standard deviation beta X 9.00% 15% 0.8 Y 10.75 15 1.2 Z 12.50 15 1.6 Fund Q has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (that is, required returns equal expected returns.) a) What is the market risk premium (rM – rRF)? b) What is the beta of Fund Q? c) What is the expected return of Fund Q? d) Would you expect the standard deviation of Fund Q to be less than 15%, equal to 15%, or greater than 15%? Explain.
Vinay
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period. ABC Po 86 46 92 le 100 200 200 Rate of return P1 91 41 102 Q1 100 1.89 % 200 200 P2 91 41 51 Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.) 22 100 200 400
Stocks A and B have the following historical returns: Year Stock A's Returns, rA Stock B's Returns, rA 2014 (19.00 (14.70 %) 2015 34.75 19.50 2016 13.75 30.90 2017 (4.25 (9.30 ) 2018 34.25 33.10 Calculate the coefficient of variation for each stock and for the portfolio. Round your answers to two decimal places. Stock A Stock B Portfolio CV Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio?
b. Consider the following information about three stocks: Probability of State of i. ii. iii. iv. State of Economy V. Boom Recession Economy 0.40 0.60 From the information given, you are required to answer the following questions. Compute the Standard Deviation for each stock. Compute the Coefficient Variation for each stock. Based on your computation in part (i) and (ii), which stock is riskier? Explain your answer. Rate of Return if State Occurs Stock Hang Stock Hang Jebat 7% 13% Tuah 28% (5%) Stock Hang Kasturi 15% 3% Assume that you have RM14,000 invested in Stock Hang Jebat whose beta is 1.5, RM19,000 invested in Stock Hang Kasturi whose beta is 2.5 and RM17,000 invested in Stock Hang Tuah whose beta is 1.6. Determine what is the beta of this portfolio. Based on your answer in part (iv), compute the required rate of return for this portfolio, given that the market rate of return is 13% and risk-free rate is 5%.
Problem 2-12 (Algo) Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two for one in the last period. Stock Po A B P1 01 P2 02 00 140 145 145 145 145 145 135 290 130 290 130 290 270 290 280 290 145 580 C Required: Calculate the first-period rates of return on the following indexes of the three stocks (t = 0 to t = 1): Note: Do not round intermediate calculations. Round your answers to 2 decimal places. a. A market-value-weighted index. b. An equally weighted index. a. Rate of return b. Rate of return % %
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is:

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