Use the following information to answer the question(s) below. Year 2007 2008 2009 Risk-free Return 2.5% 1.6% 1.4% Market Return 6.0% -38.5% 22.5% Wyatt Oil Return 5.5% -32.6% 19.6% Beta 0.833 0.853 0.865 Wyatt Oil's average historical excess return is closest to (%) (2 decimal places):

Q: Following are three economic states, their likelihoods, and the potential returns:   Economic State…

A: A standard deviation (or  σ ) is a measure of how spread out the data is with respect to the mean.

Q: Calculate the correlation coefficient (PAB) for the following situation: (Round intermediate…

A: Variables in the question:Let us denote expected return on stock A=Xand expected return on stock B=Y…

Q: Based on the following information, what is the standard deviation of returns? Rate of Return if…

A: Deviation = Return -expected returnSquared deviation = Deviation ^2Standard deviation = Variance…

Q: You have the below information about the expected returns of Palantir Technologies and Valar…

A: Given: Economic Probability(P) Palantir technologies Valar Ventures Boom 0.1 21% 39% Normal…

Q: The table below gives the historic return over the past five months for the market portfolio and two…

A: Beta (β) quantifies a stock's volatility concerning the overall market. A beta value exceeding 1…

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A: Hi student Since there are multiple questions, we will answer only first question.  Every business…

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: Following are three economic states, their likelihoods, and the potential returns: Economic State…

A: Expected return is defined as the sum of returns multiplied with respective probabilities. Where as…

Q: Review the excerpted table of historic returns shown below.  The returns have all been annualized…

A: The conceptual formula is:

Q: a. Given the following holding-period returns, compute the average returns and the standard…

A: Here, MonthS CorpMarket12%1%2-1%2%3-1%2%41%1%56%5%66%1%

Q: Calculate CAPM for expected rate of return for the 3 company's in the chart Please show work…

A: CAPM: "Capital asset pricing model" is used for calculating the expected rate of return for…

Q: Bdd

A: Probability (z)=5%Annual return(r)=12%Standard deviation(sd)=41%Value of Z(5%) as per normal…

Q: I. Consider a risky asset X. We suppose that the rate of return of the asset per year was observed…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: You have run two regressions of ADIDAS "AD" returns. In the first, you regressed ADIDAS monthly…

A: The cost of equity: The cost of equity of a multinational corporation differs in different…

Q: d. Assume the risk-free rate during this time was 4%. Calculate the Sharpe ratios for Bartman,…

A: Sharpe ratio = Return = D = DividendP1 = Price of current yearP0 = Price of previous yearTo…

Q: Year U.S. Gov’t T-Bills U.K. Common Stocks 2015 0.063 0.150 2016 0.081 0.043 2017 0.076…

A: Geometric mean return is used to calculate the average rate per period on the investment over the…

Q: Closing prices for Sillech and New Mines for the years 1999-2014 are shown below. a. Calculate the…

A: To Find: Total return for each stock Expected return Variance Standard Deviation Co-Variance

Q: quiz 8-6

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A: Step 1: Initial Scenario:State of Economy:Fast growth: 0.11 probability, 35% returnSlow growth: 0.50…

Q: In 2021, the annualized standard deviation of Merck & Co., Inc. (MRK) was 8.92% versus 10.34% for…

A: Beta of stock show the systematic risk of the company that is risk related to the overall market and…

Q: sidering the purchase of a share. Tne following table shows the possible returns Trom the share over…

A: Introduction Variance: Since it calculates how far a stock deviates from its mean, variance is a…

Q: Consider the following realized annual returns for the Index HG200: Year End Index Realized Return…

A: Here, To Find: Part a. Average Annual Return =? Part b. Standard Deviation =?

Q: Historical nominal returns for Company A have been 8% and -20%. The nominal returns for the market…

A: Expected return on company stock A Where Rf is risk-free return and Rm is the market return Let’s…

Q: Using this information, the forecast for the percentage change in the ringgit 0555.5%

A: We are given the following regression equation. In the formula above, a0 = intercept = 0.004a1 =…

Q: If the average range of the market’s return (as measured by the S&P 500) is +/- 9% for a given…

A: An investor's expected return is the typical return they anticipate from a particular investment…

Q: Returns for the Cabell's Company over the last 3 years are shown below. What's the standard…

A: Standard deviation quantifies the volatility in a stock's returns relative to its average return,…

Q: Consider the following table for different assets for 1926 through 2020. Standard Deviation 19.7%…

A: The expected return of the stock signifies the average return that the investor receives. The…

Q: Given the following information, what is the standard deviation (in percent) of the returns on this…

A: The standard deviation shows average volatility in the returns of the stock. The higher the…

Q: YearRisk-free ReturnMarket ReturnWyatt Oil…

A: The comparison of price movement between a stock and market return is known as beta. It is…

Q: Based on the provided data what is the standard deviation of the VOO ETF total returns for the…

A: Standard deviation is the measure of risk and volatility and is measured as deviation from mean…

Q: Calculate the correlation coefficient (PAB) for the following situation: (Round intermedi decimal…

A: The correlation coefficient of a portfolio measures the degree of linear relationship between the…

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.