The risk-free rate in the market is 45% and the total return on the Market Portfolio is 10.5%. The risk of the Market Portfolio, measured by its standard deviation is 18%. Stock A is mispriced and has an alpha of 2.1% and a beta of 100. Sock A residuals from the single index model have a standard deviation of 30%. To

The risk-free rate in the market is 45% and the total return on the Market Portfolio is 10.5%. The risk of the Market Portfolio, measured by its standard deviation is 18%. Stock A is mispriced and has an alpha of 2.1% and a beta of 100. Sock A residuals from the single index model have a standard deviation of 30%. To

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

See similar textbooks

Similar questions

Help
Stock X has a 9.0% expected return, a beta coefficient of 0.7, and a 40% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 20% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Do not round intermediate calculations. Round your answers to two decimal places. Calculate each stock's required rate of return. Round your answers to one decimal place. rx = % ry = % Calculate the required return of a portfolio that has $7,500 invested in Stock X and $2,500 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places. rp = %
The following are estimates for two stocks. Firm- Specific Expected Standard Stock Return Beta Deviation A 14% 0.90 30% B 21 1.40 42 The market index has a standard deviation of 20% and the risk-free rate is 7%. Required: a. What are the standard deviations of stocks A and B? b. Suppose that we were to construct a portfolio with proportions: Stock A Stock B T-bills 0.30 0.45 0.25 Compute the expected return, beta, nonsystematic standard deviation, and standard deviation of the portfolio.
Suppose that stock market returns are normally distributed with a mean of 7% and a standard deviation of 20%. There should be about a 16% chance of getting a return less than _______%. Write your answer as a whole number: eg, -15% = -15.
Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%. Stock B also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%. Portfolio AB has $300,000 invested in Stock A and $100,000 invested in Stock B. The correlation between the two stocks' returns is zero (that is, rA,B = 0). Which of the following statements is CORRECT? a. The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is overvalued. b. The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is undervalued. c. Portfolio AB's expected return is 11.0%. d. Portfolio AB's beta is less than 1.2. e. Portfolio AB's standard deviation is 17.5%.
Give typing answer with explanation and conclusion
Portfolio C has a standard deviation of 20% and a correlation with the market of 0.9. If the standard deviation of the market is 18%, wh is the beta for C? A B C D Low 0.93. 1.00. 1.11. Not enough information to determine. Confidence of your answer Medium High
What is the expected rate of return on R. Halsey Inc. stock if it has a correlation coefficient equal to 0.48 with the market portfolio and a standard deviation of 0.25? The risk free rate is 3% and the return on the market is 12%. Assume CAPM holds and the risk free and market combined portfolio has a standard deviation of 14% and an expected return of 8 %
You are analyzing a stock that has a beta of 1.3 and a standard deviation of 12.0%. The risk-free rate is 4.2% and you estimate the expected return on the market portfolio to be 11.1%. What return do you expect this stock to have? The expected return according to CAPM is: OA. 13.2% B. 14.3% OC. 19.8% OD. 18.6% OE 12.0% OF. 14.4% OG. 9.8% OH. 8.7% OL 9.0%
There are two securities: Stock G and stock H. Stcok G has expected return of 12% and a standard deviation of 20% while stock H has an expected return of 3.5% and a standard deviation of 4%. The correlation coefficient between the two securities is 0.35. The risk free rate is 3%. 1. What is the weight of stock G in the optimal risky portfolio ? 2. What does a negative weight in stock H mean?
A stock has a beta of 1.14, the expected return on the market is 10.8 percent, and the risk- free rate is 4.55 percent. What must the expected return on this stock be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %
The expectation of market returns is 20%, and the standard deviation is 25%. The risk-free rate is 7%. 1- Title i is on the efficiency frontier, it has an expectation of 30%, what is the standard deviation of returns? What is the correlation with the market? 2- The j-stock has an expectation of 35% and a standard deviation of 65%. What are the systematic risk and the specific risk of this security?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS