You have the following data on the securities of three firms. If the risk-free rate last year was 3%, and the return on the market was 11%, which firm had the best performance on a risk-adjusted basis? Use CAPM to calculate expected returns and compare them with actual returns. Return last year Beta Firm A 10% 1.12 Firm B 11% 1.0 Firm C 12% 0.65 O Firm B O Firm C O There is no difference in performance on a risk-adjusted basis O Firm A
You have the following data on the securities of three firms. If the risk-free rate last year was 3%, and the return on the market was 11%, which firm had the best performance on a risk-adjusted basis? Use CAPM to calculate expected returns and compare them with actual returns. Return last year Beta Firm A 10% 1.12 Firm B 11% 1.0 Firm C 12% 0.65 O Firm B O Firm C O There is no difference in performance on a risk-adjusted basis O Firm A
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
Related questions
Question
![You have the following data on the securities of three firms.
If the risk-free rate last year was 3%, and the return on the market was 11%, which firm had the
best performance on a risk-adjusted basis? Use CAPM to calculate expected returns and compare
them with actual returns.
Return last year
Beta
Firm A
10%
1.12
Firm B
11%
1.0
Firm C
12%
0.65
O Firm B
O Firm C
O There is no difference in performance on a risk-adjusted basis
O Firm A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F09cb7ddc-657f-47f3-a478-277b873c04f6%2Fff975fce-68f5-4b03-85e8-34dc16036833%2Fyt4k3s_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You have the following data on the securities of three firms.
If the risk-free rate last year was 3%, and the return on the market was 11%, which firm had the
best performance on a risk-adjusted basis? Use CAPM to calculate expected returns and compare
them with actual returns.
Return last year
Beta
Firm A
10%
1.12
Firm B
11%
1.0
Firm C
12%
0.65
O Firm B
O Firm C
O There is no difference in performance on a risk-adjusted basis
O Firm A
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
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…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
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