Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 30% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 25% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. a. Calculate each stock's coefficient of variation. Do not round intermediate calculations. Round your answers to two decimal places. CVx= CVy= 2

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 30% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 25% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. a. Calculate each stock's coefficient of variation. Do not round intermediate calculations. Round your answers to two decimal places. CVx= CVy= 2

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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You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $1,000 investment in each stock under four different economic conditions has the probability distribution shown to the right. Complete parts (a) through (c) below. Probability 0.1 0.2 0.4 0.3 a. Compute the expected return for stock X and for stock Y. The expected return for stock X is (Type an integer or a decimal. Do not round.) Economic Condition Recession Slow growth Moderate growth Fast growth Returns Stock X Stock Y - 40 30 80 150 - 110 40 140 210
The index model has been estimated from the excess returns for stock A with the following results: = RA 12.00% +1.55RM+ eA °M = 24.00% σ(eд) = 18.50% What is the standard deviation of the return for stock A? (Round your answer to 2 decimal places.) Standard deviation %
Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 8%; rRF = 3%; rM = 12%. Round your answer to two decimal places.
Two stocks, A and B, have beta coefficients of 1.0 and 0.4, respectively. If the expected return on the market is 9 percent and the risk-free rate is 6 percent, what is the risk premium associated with each stock? Round your answers to two decimal places. The risk premium for stock A: The risk premium for stock B: % %
Ο A stock has a required return of 16%, the risk-free rate is 5.5%, and the market risk premium is 4%. a. What is the stock's beta? Round your answer to two decimal places. b. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. I. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. III. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. IV. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk…
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Vinay
The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15.00 % 19.00 % 0.4 10.00 6.00 0.3 18.00 10.00 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Calculate the expected rate of return for the market. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %Calculate the expected rate of return for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank % Calculate the standard deviation for the market. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %Calculate the standard deviation for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %
Required Rate of Return Suppose rRF = 3%, rM = 8%, and rA = 7%. Calculate Stock A's beta. Round your answer to one decimal place. If Stock A's beta were 1.1, then what would be A's new required rate of return? Round your answer to one decimal place. %
A stock has a required return of 16%, the risk-free rate is 5.5%, and the market risk premium is 4%. a) What is the stock's beta? b) If the market risk premium increased to 8%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places.
Assume that the risk-free rate is 7.5% and the required return on the market is 9%. What is the required rate of return on a stock with a beta of 3? Round your answer to two decimal places.
What is the reward-to-risk ratio for Stock X, in decimal form? Round your answer to 4 decimal places (example: if your answer is .03579, you should enter .0358). Margin of error for correct responses: +/- .0005. expected return (implied by market price) Beta Stock X 9.6% 1.46 S&P500 12% ? T-bills 4% ?

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