Quèstion 12 What is the covariance of returns between stocks A and B? Expected retum of A is 30% and B's expected retum 23.333333% Year Retum A Return B 2017 40% 55% 2016 bo% 35% 2015 20% 20% O 0.025 00 O 0.07 O None of the listed items is correct O 0.095

Q: Securities A B C D E 7 Select one: Expected Standard Return (in %) Deviation of with 4.11 15.55 8.12…

A: Unsystematic risk, also known as specific risk, diversifiable risk, or idiosyncratic risk, refers to…

Q: Problem 12-22 Calculating Beta (LO4, CFA1) You are given the following information concerning a…

A: The percentage change in the worthiness of investment using the market value added with the…

Q: a. The terminal growth rate will be 10.30%. (Round your answer to 2 decimal places.) Intrinsic value…

A: We are going to build a spread sheet model that would compute the value of the stock when you change…

Q: Questions 6 The performance (%) of one stock and one bond over the past four years is as follows:…

A: Average return refers to the return earned over a specific unit. A unit can be a share, product,…

Q: 1 1 bok ences Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2017 1960 to 1969…

A: Dear student, kindly check the answer in the explanation box below.Explanation:Dear student, below…

Q: •What is the covariance of returns between stocks A and B?   year    Year              Return A…

A: Covariance is the proportion by which two sets of investment returns oscillate in relation to each…

Q: Month 12 84 SE 86 37 39 40 Excess Returns over the risk free rate M 0.67 3.72 -1.56 2 -2.08 1.69…

A: In this question, we are provided with Excess return over the risk-free rate and need to find out…

Q: What is the expected return of the following portfolio? Amount Stock Invested A $42,240 B $26,201 C…

A: Expected return of a portfolio is the weighted return. Weight for each Stock is determined and then…

Q: Review the following market information: Current Stock Market Return                    11.25%…

A: The required return is the minimum return an investor expects from a stock. It is calculated by the…

Q: Given Investment E(R) σ Stock A $15,000 10% 10% Stock B $5,000 5% 25% Total $20,000 and Corr(AB) =…

A: The formula for the covariance of two random variables X and Y in relation to their correlation and…

Q: What is the standard deviation of Ava's stock, giving the following information: Year

A: Standard Deviation is a measure of statistics and measures the dispersion of the data relative to…

Q: Problem 13-4 Information Ratio (LO1, CFA5) You are given the following information concerning three…

A: The IR of the portfolio refers to the measure of the performance of a portfolio calculated by…

Q: Q3 Consider the following information related to stock returns of a company: Year Probability Return…

A: The question can be solved as follows:

Q: Use the following table of information: Stock X Stock Y Expected Return 14% 18% Standard Deviation…

A: Expected return is a way of calculating profit or loss anticipated by an investor on his investment…

Q: What is the covariance of returns between stocks A and B? Year Retum A Retum B 2017 60% 35% 2016 20%…

A: Here, To Find: Covariance =?

Q: Problem 6-13 Historical Realized Rates of Return Stocks A and B have the following historical…

A: Average return is calculate by AVERAGE function in Excel. Standard deviation is calculated by…

Q: uestion 11 Using the single index model, what is the alpha of a stock with beta of 1.2, a market…

A: The alpha of the stock refers to the measure of the performance of the stock relative to the risk…

Q: Historical Returns: Expected and Required Rates of Return You have observed the following returns…

A: 1. Rate of Return: The rate of return is a financial metric that represents the gain or loss on an…

Q: Assume CAPM is a correct model. Stock A's required rate of return is 12% and Stock B's required rate…

A: Stock -A Required rate of return is 12% Beta 1.2 Stock -B Required rate of return is 12% Beta 1.2…

Q: CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate…

A: The securities market line (SML) is a line on a chart that graphically depicts the capital asset…

Q: Expected Return on the market HPR Beta Risk-free rate Stock ABC 15.68% 1.2 1% 6.68% What is the…

A: Alpha is the abnormal return which the investors get and is above the equilibrium or expected return…

Q: You have the following information: A B C 2% 3% 1.5 0.5 2 Alpha 1% Beta 2 D -2% Market 0% 1 Res.…

A: The performance of the portfolio can measure by using the 3 different methods as Sharpe ratio, the…

Q: None

A: To solve this problem, we need to perform the following steps:a. Calculate the mean return and the…

Q: Fill in the missing information in the following table. Assume that Portfolio AB is 60 percent…

A: Return of Portfolio AB= Stock A return * % invested in A +  Stock B return * (1-% invested in…

Q: Year ASX 300 Index ASX 300 Dividend Yield (%) Return_risky portfolio 2010 4760.79 3.76 - 2011…

A: Every investor tries to maximise his wealth by seeking for maximum returns. Therefore, asset…

Q: Question 8 A stock has a beta of 1.33, the expected return on the market is 11 percent, and the…

A: Answer: B. The minimum discount rate the firm should require on any project The weighted average…

Q: ar Energy Services has a Beta sury bill is currently 4.4% and 0%. What is the market returnE

A: The market return can be calculated as follows :

Q: Chapter 6, Problem 14: Assume the data for two stocks, X and Y, are given below. Could the…

A: Expected return on Stock A (ErA) = 8%Expected return on Stock B (ErB) = 13%Standard deviation of…

Q: Stock Duke Energy Microsoft Wal-Mart Expected Standard Return Deviation 14% 6% 44% 23% 23% 14% O A.…

A: The volatility of the portfolio refers to the spread of the return of the portfolio around the…

Q: A B C Po 91 ¹ 51 102 Rate of return 90 100 200 200 P1 96 46 112 Rate of return Required: Calculate…

A: Return on Value (RoR) is an important financial metric used to measure the profitability of an…

Q: The following table shows historical beginning-of-year prices for two stocks. A B C Year Stock A…

A: 1 Year Stock A  Stock B 2 2014 33.47 575.35 3 2015 31.54 569.84 4 2016 30.91 594.22 5 2017…

Q: E(rs) 10 eight in stocks WS -0.1 0.0 0.1 0.2 0.3 0.4 0.6 0.8 1.0 1.1 E(1 B) 5 Portfolio expected…

A: First, I'm going to list the formula used and then solve them in excel. Portfolio expected return =…

Q: Covariance with Mean Return Stock AOL Microsoft Intel AOL .002 .001 15% Microsoft .001 .002 .001 12…

A: Tangency Portfolio - The Sharpe ratio-maximizing tangency portfolio is one that optimizes the Sharpe…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.