Your portfolio consists of $62,276 invested in a stock that has a beta = 1.2,$23,528 invested in a stock that has a beta = 0.9, and $20,786 invested in astock that has a beta = 0.9. The risk-free rate is 3.4%. Last year this portfolio hada required return of 8.2%. This year nothing has changed except that the marketrisk premium has increased by 4.2%. What is the portfolio's current required rateof return?13.22%12.22%13.72%11.72%12.72%

Step 1: Calculate the new market risk premium.Last year's market risk premium + Increase in market…

Answered: Your portfolio consists of $62,276…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The risk-free rate of return is 3% and the market risk premium is 8%. You hold three stocks in your portfolio: Stock A B C E(R) 9.4% 14.2% 10.2% Value 15,000 33,000 27,000 What is the beta and expected return of your portfolio under CAPM?
Manshukh
XYZ stock has a standard deviation of return of 25% and the stock index has a standard deviation of return of 15%. The correlation coefficient between stock return and stock index return is 0.82. The stock is expected to pay dividend of $4 in one year and its expected price in one year is $30. The risk-free rate is 3%. The stock market index has an expected return of 12%. (1) Estimate the beta of the stock. Is the stock riskier than the stock market index? (2) Use the security market line to determine the required rate of return of the stock. (3) Determine the value of the stock. (4) If the stock has a current price of $28, what is the expected return? Would you investment in the stock?
Tyler Trucks stock has an annual return mean and standard deviation of 10.0 percent and 29 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 21.0 percent and 65 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is -.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 2.5 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss %
Tyler Trucks stock has an annual return mean and standard deviation of 14 percent and 37 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 11.2 percent and 55 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is 0.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 1 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss 16.07 %
Stock R has 14% expected return, 20% standard deviation, 1.3 beta coefficient where as Stock S has 9% expected return, 30% standard deviation and a beta coefficient of 0.8. the market risk premium is 6.5% and the risk-free rate is 5%. Calculate the coefficient of variation of each stock. Calculate the required rate of return of each stock. Calculate the required return of a portfolio that has RM2,000 in Stock S and RM 8,000 in Stock R.
A portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were paying 4.5%. This portfolio had a Sharpe measure of ____.
Tyler Trucks stock has an annual return mean and standard deviation of 10 percent and 45 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 10.4 percent and 51 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is 0.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 1 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss %

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