You have been looking for stocks that are "good values" and have calculated expected returns for five stocks. Assume the risk-free rate (kRF) is 7% and the market risk premium (kM - kRF) is 2%. which security would be the best investment? (Assume you must choose just one.) Show your solutions and explain your answer. Stock Expected Return Beta A 9.01% 1.70 B 7.06% 0.00 5.04% 0.67 8.74% 0.87
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A: Required rate of return = risk free rate +(beta * market risk premium)
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Q: ou have been scouring PSE Edge looking for stocks that are “good values” and have calculated…
A: Risk Free Rate = 7% Market Return = 9%
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A: Required rate of return is defined as the minimum return regarding an investor, which is used to…
Q: Assume you have invested in two other stocks: Stock A has a beta of 1.20 and Stock B has a beta of…
A: Given data for stock A: risk free rate (Rf) = 2 % market return ( Rm) = 12% Beta = 1.20 Using CAPM…
Q: You have been looking for stocks that are "good values" and have calculated expected returns for…
A: Risk free rate = 7% Market risk premium = 2%
Q: A stock has a beta of 1.22, the expected return on the market is 12 percent, and the risk- free rate…
A: given, beta = 1.22 expected market return ( rm) = 12% risk free rate ( rf) = 4%
Q: A stock has a beta of 1.12, the expected return on the market is 10 percent, and the free rate is 3…
A: In this we have to use capital assets pricing formula for calculation of expected return.
Q: A stock you are holding has a beta of 2.0 and the stock is currently in equilibrium. The required…
A: Given data; bets of stock = 2.0 Required rate of return on stock = 15% Required rate of return on…
Q: Suppose you are given stocks A and B. Stock A has an expected return of 11% and a standard deviation…
A: The provided information are: Stock Expected return Standard deviation A 11% 4%…
Q: A stock has an expected return of 16 percent, its beta is 0.45, and the risk-free rate is 6.4…
A: CAPM is an investment theory that establishes the relationship between the expected return and the…
Q: Stock A has a beta of 0.7, whereas Stock B has a beta of 1.3. Portfolio P has 50% invested in both A…
A: According to CAPM: required return = risk free rate+beta×market risk premium
Q: A stock has an expected return of 13.4 percent, its beta is 1.60, and the risk-free rate is 5.5…
A: We require to compute the expected market return (Rm) from following details : Expected return on…
Q: You are given information on two stocks. Stock AXE has a required return of 12.25% and analysts…
A: In this we have to calculate the expected return and required return and compare.
Q: Stock A has a beta of 0.2, and investors expect it to return 3%. Stock B has a beta of 1.8, and…
A: The market risk premium can be computed with the help of CAPM equation
Q: The correlation coefficients between several pairs of stocks are as follows: Corr(A, B) = .85;…
A: Answer: The correct choice is option (c) “Stock D” which is combination of 50% of stock A and 50% of…
Q: A stock has a beta of 1.1, the expected return on the market is 10.4 percent, and the risk-free rate…
A: Expected return = Risk free rate+Beta*(Market return-Risk free rate) Where Risk free rate = 4.75%…
Q: Stock R has a beta of 1.4, Stock S has a beta of 0.95, the expected rate of return on an average…
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Q: By how much does the required return on the riskier stock exceed the required return on the less…
A: Required return: It is the minimum rate of return an investor will seek for investing in a company.…
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A: The minimum return that the investor expects to receive from the investment is referred to as the…
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A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.
Q: A certain stock has a beta of 1.2. If the risk-free rate of return is 4.5 percent and the market…
A: Risk-free return = 4.5% Market risk premium = 8% a) Beta = 1.2 b) Beta = 1.08 CAPM formula: Expected…
Q: Currently the risk-free rate equals 5% and the expected return on the market portfolio equals 11%.…
A: Given: Risk free rate “Rf” = 5% Market return “Rm” = 11% Stock A Beta = 1.33 Stock B Beta = 0.7…
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A: The riskiness of security is measured by "Beta". Beta measures the volatility of the stock with…
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A: As per CAPM Ri = Rf + B (Rm - Rf) Where Ri = Return on equity Rf = Risk free rate of return B =…
Q: Stock A has a beta of 1.30, and its required return is 13.25%. Stock B's beta is 0.90. If the…
A: Given Beta of Stock A = 1.30 Risk free Rate = 4.75% Required return of stock A = 13.25%
Q: stock has a beta of 1.14, the expected return on the market is 10.8 percent, and the risk-free rate…
A: Beta=1.14 Return is market =10.8% Risk free rate =4.55%
Q: Stock R has a beta of 2.0, Stock S has a beta of 0.35, the required return on an average stock is…
A: Stock R beta (BR) = 2.0 Stock S beta (BS) = 0.35 Risk free rate (RF) = 3% Market rate of return (RM)…
Q: Stock R has a beta of 1.7, Stock S has a beta of 0.8, the required return on an average stock is…
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Q: Stock R has a beta of 1.5, Stock S has a beta of 0.85, the required return on an average stock is…
A: Given, beta(stock R)=1.5 beta(stock S)=0.85 Average stock=9% Rate of return=3%
Q: You have been scouring PSE Edge looking for stocks that are “good values” and have calculated…
A: Risk free rate (Rf) = 7% Market return (Rm) = 9% Let's use CAPM to calculate the required return for…
Q: Stock X has a beta of 0.6, while Stock Y has a beta of 1.4. Which of the following statements is…
A: Beta is a statistical measure which measures the risk involved in a particular stock.
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A: We need to use CAPM to calculate expected return Expected return =Risk free rate +Beta(Market return…
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A: Beta of Stock = Change in Rate of Return of Stock / Change in Market return Therefore, Beta of Stock…
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A: In this we have to calculate expected return of both stock using CAPM model and find the difference.
Q: A stock has a beta of 1.13, the expected return on the market is 10.7 percent, and the risk-free…
A: Beta (B) = 1.13 Market return (MR) = 10.7% Risk free rate (RF) = 4.6%
Q: A stock has a beta of 1.04, the expected return on the market is 11.75, and the risk-free rate is…
A: A stock is a financial security issued by companies to raise equity funds from the primary market.…
Q: A stock has a beta of 1.32 and an expected return of 12.8 percent. The risk-free rate is 3.6…
A: The slope of SML is Return of Market minus Rf. Note: Rf= Risk-free Rate SML= Security Market Line
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- b) Suppose that you observe the following information in Table 2 for stocks A and B: Table 2 Expected Return (%) 11% Stock Beta A 0.8 В 14% 1.5 The risk-free rate of return is 6% and the expected rate of return on the market index is 12%. Using the Single-Index Model, calculate the alpha of both stocks. Show your calculations. Explain what the alpha of the single-factor model represents and interpret your results.Suppose that you observe the following information in Table 2 for stocks A and B: Table 2 Expected Return (%) 11% Stock Beta A 0.8 B 14% 1.5 The risk-free rate of return is 6% and the expected rate of return on the market index is 12%. Using the Single-Index Model, calculate the alpha of both stocks. Show your calculations. Explain what the alpha of the single-factor model represents and interpret your results.(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Probability 0.20 0.60 0.20 Probability 0.15 0.35 0.35 0.15 (Click on the icon in order to copy its contents into a spreadsheet.) ew an example Get more help. T 3 a. Given the information in the table, the expected rate of retum for stock A is 15.6 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.) E D 80 73 Return. 12% 16% 18% U с $ 4 R F 288 F4 V Common Stock B % 5 T FS G 6 Return -7% 7% 13% 21% B MacBook Air 2 F& Y H & 7 N 44 F? U J ** 8 M | MOSISO ( 9 K DD O . Clear all : ; y 4 FIX { option [ + = ? 1 Check answer . FV2 } ◄ 1 delete 1 return shift
- K (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Probability 0.20 0.60 0.20 Common Stock B Return 13% 17% 18% Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) Return -7% 5% 16% 21% www a. Given the information in the table, the expected rate of return for stock A is 16.40 %. (Round to two decimal places.) The standard deviation of stock A is 1.74 %. (Round to two decimal places.) b. The expected rate of return for stock B is 9.8 %. (Round to two decimal places.) The standard deviation for stock B is 6.12 %. (Round to two decimal places.)You have been scouring PSE Edge looking for stocks that are “good values” and have calculated expected returns for five stocks. Assume that the risk-free rate is 7% and the market return is 9%. Which security would be the best investment? Choose the (1) expected return, and (2) beta of that best investment. (1) 8.01%; (2) 1.70 (1) 7.06%; (2) 0.00 (1) 4.04%; (2) -0.67 (1) 10.55%; (2) 2.50(Expected rate of return and risk) Syntex, Inc is considering an investment in one of two common stocks Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and retum? Common Stock A Probability 0.25 0,50 0:25 Common Stock B Return 10% 17% 10% Probability 0.10 0:40 0:40 010 (Click on the soon in order to copy its contents into a spreadsheet) Return -6% 8% 15% 20% COD a. Given the information in the table the expected rate of return for stock A is 15.5% (Round to two decimal places) The standard deviation of stock A is 4 36% (Round to two decimal places)
- 1. If a stock has a(Alpha)=0.002, b(Beta)=1.4, Using the market model (eq. 7.4), find the expected percent return for the above stock if the market return is expected to be 2% and the risk free rate is 1%. 2. Assume stock prices follow a random walk and a particular stock has had the following recent stock prices: Day 1: 129.5 Day 2: 126.9 Day 3: 127.1 what is the best estimate of day 4 prices?(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Probability 0.20 0.60 0.20 Probability 0.15 0.35 0.35 0.15 (Click on the icon in order to copy its contents into a spreadsheet.) Common Stock B Return 13% 14% 18% Return - 6% 7% 15% 21% a. Given the information in the table, the expected rate of return for stock A is 14.6 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.)Finance The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Arethese stocks correctly priced? Why or why not? Use E(Ri) = Rf + βi(E(RM) − Rf).
- We have the following information on Stocks A and B. The risk-free rate is 5%, and the market risk premium is 7.5%. Assume that the market portfolio is correctly priced. Based on the reward-to-risk ratio, are Stocks A and B overpriced, underpriced, or correctly priced? Stock A Stock B Expected return 1196 16.25% Beta 0.8 1.5You are exploring the use of APT in making investment choices. You have identified three factors labelled F1, F2, and F3 with corresponding risk premia RP1 = 3%, RP2 = 6%, and RP3 = 2%. A stock with ticker ABC has historically shown returns which have followed the equation: rABC=0.14+.50F1+1.20F2+.8F3+eABC What is the equilibrium rate of return for stock ABC using the APT, if the T-bill rate is 5%?1. Suppose the risk-free return is 4.0% and the market portfolio has an expected return of 10.0% and a standard deviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.75. What is its expected return? The expected return is %. (Round to two decimal places.) r your answer in the answer box and then click Check Answer. arts showing e Type here to search 日|