you have observed the following returns over time: Year Stock X Stock Y Market 2011 13 % 12 % 13 % 2012 18   7   10   2013 -12   -6   -10   2014 2   1   2   2015 19   9   16   Assume that the risk-free rate is 5% and the market risk premium is 6%. 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.

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
icon
Related questions
Question

you have observed the following returns over time:

Year Stock X Stock Y Market
2011 13 % 12 % 13 %
2012 18   7   10  
2013 -12   -6   -10  
2014 2   1   2  
2015 19   9   16  

Assume that the risk-free rate is 5% and the market risk premium is 6%. 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

 

 

  1. What is the beta of Stock X? Do not round intermediate calculations. Round your answer to two decimal places.

    fill in the blank 2

    What is the beta of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places.

    fill in the blank 3

  2. What is the required rate of return on Stock X? Do not round intermediate calculations. Round your answer to one decimal place.

    fill in the blank 4 %

    What is the required rate of return on Stock Y? Do not round intermediate calculations. Round your answer to one decimal place.

    fill in the blank 5 %

  3. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to one decimal place.

    fill in the blank 6 %

 

 
Check My Work
Reset Problem

 

File
1234567
5
B17
<>
Assignments - you can access...
template - Saved ✓
Home
Insert Draw
Historical Returns:
Year
2011
2012
2013
2014
2015
Arial
8
9
10
11 Risk-free rate, TRF
12 Market risk premium, RPM
13 % of Stock X in Portfolio
14 % of Stock Y in Portfolio
15
16
17 Beta, bi
Required rate of return, r¡
fx
Workbook Statistics
A
B
C
Historical Returns: Expected & Required Rates of Return
Sheet1 +
Page Layout
V 10
Cengage Digital Learning
Stock X
13.00%
18.00%
-12.00%
2.00%
19.00%
5.00%
6.00%
80%
20%
Stock X
Formulas Data
B
Stock Y
12.00%
7.00%
-6.00%
1.00%
9.00%
Stock Y
https://ng.cengage.com/activityservice/run/html5/handler.jsp?id=c1c04b1f4a487ae_912]
D
Market
13.00%
10.00%
-10.00%
18
19
20 Portfolio beta, bp
21 Required return on portfolio, rp
22
23 Alternate portfolio return calculation using individual stocks' required returns:
24 Required return on portfolio, rp
25
26
27
28
29
30
31
32
33
<
2.00%
16.00%
V
Review View
Search for tools, help, and more (Option + Q)
#N/A
#N/A
Mind Tap - Cengage Learning
#N/A
#N/A
#N/A
E
Help
ab
Formulas
#N/A
#N/A
Number
C Excel Online Student Work
F
G
v
←0
.00
H
.00
→.0
b Consider the following informat...
K
ST
NT
L
Σv ZPv
M
N
Start Page
Editing ✓
O
Give Feedback to Microsoft
+
Comments
T
P
100% +
Transcribed Image Text:File 1234567 5 B17 <> Assignments - you can access... template - Saved ✓ Home Insert Draw Historical Returns: Year 2011 2012 2013 2014 2015 Arial 8 9 10 11 Risk-free rate, TRF 12 Market risk premium, RPM 13 % of Stock X in Portfolio 14 % of Stock Y in Portfolio 15 16 17 Beta, bi Required rate of return, r¡ fx Workbook Statistics A B C Historical Returns: Expected & Required Rates of Return Sheet1 + Page Layout V 10 Cengage Digital Learning Stock X 13.00% 18.00% -12.00% 2.00% 19.00% 5.00% 6.00% 80% 20% Stock X Formulas Data B Stock Y 12.00% 7.00% -6.00% 1.00% 9.00% Stock Y https://ng.cengage.com/activityservice/run/html5/handler.jsp?id=c1c04b1f4a487ae_912] D Market 13.00% 10.00% -10.00% 18 19 20 Portfolio beta, bp 21 Required return on portfolio, rp 22 23 Alternate portfolio return calculation using individual stocks' required returns: 24 Required return on portfolio, rp 25 26 27 28 29 30 31 32 33 < 2.00% 16.00% V Review View Search for tools, help, and more (Option + Q) #N/A #N/A Mind Tap - Cengage Learning #N/A #N/A #N/A E Help ab Formulas #N/A #N/A Number C Excel Online Student Work F G v ←0 .00 H .00 →.0 b Consider the following informat... K ST NT L Σv ZPv M N Start Page Editing ✓ O Give Feedback to Microsoft + Comments T P 100% +
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Foreign Exchange Market
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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