Concept explainers
(A)
Adequate information
The performance of the stock is compared by two investment advisers. One advisor projected return of 16%, whereas another projected return of 19%. The beta of second adviser was 1 and first adviser was 1.5.
To determine:
The best advisor that stands to be a better selector pertaining to an individual stock
Introduction:
Stock stands to be the general term which is taken into consideration for describing the company's ownership certificates. On the other hand share refers to the company's stock certificate. When a share of a particular company is held by an investor, he is known as a shareholder.
(B)
To determine:
Which selector stands to be a better stock selector amongst the two when the return from market accounts for 14% and the T-bill rate tends to be 6%.
Introduction:
The abnormal return reflects the difference underlying the predicted return and the actual return by the security market line. In other words, abnormal return is used to represent the returns ascertained from a portfolio or security over given time period that stand to be different from the expected return.
(B)
To determine:
Which selector stands to be better stock selector amongst the two when the return from market accounts for 15% and the T-bill rate tends to be 3%.
Introduction:
The abnormal return reflects the difference underlying the predicted return and the actual return by the security market line. In other words abnormal return is used to represent the returns ascertained from a portfolio or security over given time period that stand to be different from the expected return.
Want to see the full answer?
Check out a sample textbook solutionChapter 9 Solutions
EBK INVESTMENTS
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author: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 ProfessorPublisher:McGraw-Hill Education