What is the beta of a firm whose equity has an expected return of 21.3 percent when the risk-free rate of return is 7.0 percent and the expected return on the market is 18.0 percent? Select one: O a. None of these O b. 0.79 O c. 1.30 d. 1.57

What is the beta of a firm whose equity has an expected return of 21.3 percent when the risk-free rate of return is 7.0 percent and the expected return on the market is 18.0 percent? Select one: O a. None of these O b. 0.79 O c. 1.30 d. 1.57

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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Remember the following the 1-factor model or CAPM is defined as re-rf beta * [rm -rf] what is the return on equity (re) if rf = 0.05 rm = 1.88 beta = 1.47
son.3
Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.25 .87 Expected Return 1080 .0820 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return on market using Pete Corporation a. Expected return on market using Repete Company b. Risk-free rate de de % % %
37. An analyst developed the following probability distribution of the rate of return for a common stock: Rate of return Scenario Recession -0.05 0.10 0.25 What's the standard deviation of the rate of return? Show your calculations. n k=ZkP |o= i=1 A. 0.0549. B. 0.0649. Normal Boom . 0.0749. D. 0.0849 E. 0.0949. 건 Probability 0.20 0.60 0.20 i-1 (k₂ − Ê)² P₂.
IBM AMZN E(R) 0.07 0.11 Standard Deviation0.10 0.18 Correlation0.45 Suppose you have the above data on IBM and Amazon, compute the expected return and the standard deviation of an equally weighted portfolio invested in the two securitiesis there a diversification benefit? Please show your work and round to at least 3 decimal places
15 A stock with a beta of zero would be expected to have a rate of return equal to Group of answer choices the risk-free rate the market rate of return the market risk premium zero
Nikul
Consider the following information: Standard Deviation Beta Security C Security K Which security will have a higher expected return? Oa. C O b. K 20% 30% 1.25 0.95 A Oc Both securities will have the same expected return Od. Insufficient information to answer the question
QUESTION Assume that the expected rates of return and the beta coefficients of the alternatives supplied by an independent analyst are as follows: Security Estimated rate of returns Beta Nescom 5% 1.5 Market 4 1 Pk_Steel 3.5 0.75 T_Bills 3 0 Nawab 1 -0.6 What is a beta coefficient, and how are betas used in risk analysis? Do the expected returns appear to be related to each alternative’s market risk? Is it possible to choose among the alternatives on the basis of the information developed thus far?
Suppose you observe the following situation: Security Beta Expected Return Peat Company 1.70 13.60 Re - Peat Company 0.85 10.80 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk - free rate?
You want to estimate the cost of equity of firm A using CAPM. Firm A has a beta of 1.3. Assume that the return on the market portfolio is 8.52%, and the risk-free rate is 3%. What is the cost of equity of firm A? Group of answer choices There is not enough information to answer this question. 10.17% 11.74% 14.21% 12.11%
Given the following probability distributions, what are the expected returns for the Market and for Security J? Statei Pr i rM rJ 1 0.3 −10% 40% 2 0.4 10 −20 3 0.3 30 30

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