a)
To discuss:
Calculation of beta.
Introduction:
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
b)
To discuss:
Calculation of beta.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
c)
To discuss:
Calculation of beta.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
d)
To discuss:
Calculation of beta.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
e)
To discuss:
Maximum expected return for risk averse.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
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Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
- Asset A B C Cost $35,000 $36,000 $39,000 $10,000 Beta at purchase 0.79 0.96 1.49 1.32 Yearly income $1,600 $1,500 SO $250 Value today $35,000 $37,000 $45,500 $10,500arrow_forwardQuantitative Problem: You are holding a portfolio with the following investments and betas: Dollar investment Beta 1.35 1.50 0.85 -0.20 Stock A B с $200,000 100,000 500,000 200,000 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places. %arrow_forwardmc question attachedarrow_forward
- q2aarrow_forwardYou have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock A B с Investment Beta $202,000 303,000 505,000 Beta of the portfolio 1.59 Expected rate of return 0.59 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 15 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) 1.16 %arrow_forwardGiven simple required answerarrow_forward
- Please send me the solution correct one thanku sirarrow_forwardQuestion content area top Part 1 (Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is 7 percent, and the expected return for the market is 12.5 percent. Using the CAPM, what rates of return should Anita require for each individual security? Stock Beta H 0.71 T 1.62 P 0.89 W 1.37 (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The expected rate of return for security H, which has a beta of 0.71, is enter your response here%. (Round to two decimal places.) Part 2 b. The expected rate of return for security T, which has a beta of 1.62, is enter your response here%. (Round to two decimal places.) Part 3 c. The expected rate of return for security P, which has a beta of 0.89, is enter your response here%. (Round to two decimal places.) Part 4 d. The expected rate of return for…arrow_forwardRisk and Rates of Return; Risk in Portfolio Context You are holding a investments and the portfilio with the following Stock A B C D Total Investament Dollar Investment $250,000 150,000 400,000 200,000 $1,000,000 Beta 1.20 1.60 0.85 -0.15 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Round your answer to three places. decimalarrow_forward
- Suppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return and risk. Which investment provides the highest expected return? Investment A: total return= 10% with profitability 50% total return= 20% with profitability 50% Investment B: total return= 12% with profitability 50% total return= 18% with profitability 50% Investment A: total return= 5% with profitability 60%arrow_forwardPortfolio return and standard deviation Jamie Wong is thinking of building an investment portfolio containing two exchange traded funds (ETFs) Jamie plans to invest $2,000 in Vanguard S&P 500 ETF (VOO) and $8,000 in Invesco QQQ Trust (QQQ). Jamie has decided to analyze some historical returns to get a sense for her portfolio's possible future risk and return. Six years of historical annual returns for each ETF are shown in the following table: a. Calculate the portfolio return, rp, for each of the 6 years assuming that 20% is invested in VOO and 80% is invested in QQQ b. Calculate the average annual return for each ETF and the portfolio over the six-year period. c. Calculate the standard deviation of annual returns for each ETF and the portfolio. How does the portfolio standard deviation compare to the standard deviations of the individual ETFs? d. Calculate the correlation coefficient for the two ETFs. How would you characterize the correlation of returns of the two ETFs? e. Discuss…arrow_forwardWhat is the expected annual return of this portfolio?arrow_forward
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