INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 21, Problem 50PS
Summary Introduction
To determine implicit assumption about the volatility of the stock's
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Suppose that during the coming year, the risk free rate, rRF, is expected to remain the same, while the market risk premium (rM − rRF), is expected to fall. Given this forecast, which of the following statements is CORRECT?
a. The required return on all stocks will remain unchanged.
b. The required return will fall for all stocks, but it will fall more for stocks with higher betas.
c. The required return for all stocks will fall by the same amount.
d. The required return will fall for all stocks, but it will fall less for stocks with higher betas.
e. The required return will increase for stocks with a beta less than 1.0 and will decrease for stocks with a beta greater than 1.0.
During the coming year, the market risk premium (rm− rf), is expected to remain the same, while the risk-free rate, rf, is expected to fall. Given this forecast, which of the following statements is CORRECT?
Group of answer choices
The required return will fall for all stocks, but it will fall less for stocks with higher betas.
The required return will fall for all stocks, but it will fall more for stocks with higher betas.
The required return on all stocks will remain unchanged.
The required return for all stocks will fall by the same amount.
The required return will increase for stocks with a beta less than 1.0 and will decrease for stocks with a beta greater than 1.0.
Suppose that the annual return for
particular stock follows the same
distribution every year, and that the
return for any given year is
independent of the returns for any
prior years. Based on an analysis of
the stock's annual returns over an
12 year period, it is determined that
the 95% confidence interval for the
stock's expected annual return is
given by (-0.1724, 0.2861). Find the
volatility of the stock. Use the
approximation formula from Berk
and DeMarzo.
38.52%
40.90%
42.09%
37.32%
39.71%
Chapter 21 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 21 - Prob. 1PSCh. 21 - Prob. 2PSCh. 21 - Prob. 3PSCh. 21 - Prob. 4PSCh. 21 - Prob. 5PSCh. 21 - Prob. 6PSCh. 21 - Prob. 7PSCh. 21 - Prob. 8PSCh. 21 - Prob. 9PSCh. 21 - Prob. 10PS
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