whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

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Answer 1

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

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Jeff Krause purchased 1,000 shares of a speculative stock in January for $1.89 per share. Six months later, he sold them for $9.95 per share. He uses an online broker that charges him $10.00 per trade. What was Jeff's annualized HPR on this investment? Jeff's annualized HPR on this investment is %. (Round to the nearest whole percent.)

Congratulations! Your portfolio returned 16.7% last year, 2.5% better than the market return of 14.2%. Your portfolio had a standard deviation of earnings equal to 18%, and the risk-free rate is equal to 4.4%. Calculate Sharpe's measure for your portfolio. If the market's Sharpe's measure is 0.29, did you do better or worse than the market from a risk/return perspective? The Sharpe's measure of your portfolio is (Round to two decimal places.)

On January 1, 2020, Simon Love's portfolio of 15 common stocks had a market value of $258,000. At the end of May 2020, Simon sold one of the stocks, which had a beginning-of-year value of $26,900, for $31,400. He did not reinvest those or any other funds in the portfolio during the year. He received total dividends from stocks in his portfolio of $11,900 during the year. On December 31, 2020, Simon's portfolio had a market value of $246,000. Find the HPR on Simon's portfolio during the year ended December 31, 2020. (Measure the amount of withdrawn funds at their beginning-of-year value.) Simon's portfolio HPR during the year ended December 31, 2020, is %. (Round to two decimal places.)

Answer 2

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Expert Solution & Answer

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See solution

Answer 4

Question

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Expert Solution & Answer

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Answer 5

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Answer 6

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Answer 7

Chapter 9, Problem 3PS

A

Summary Introduction

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

Answer 8

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Answer 9

Summary Introduction

(B)

To determine:

whether following statement is true or false-

"The CAPM implies that investor require a higher return to hold highly volatile securities."

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security* Market risk premium

Answer 10

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Answer 11

Summary Introduction

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Answer 12

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Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 9 - Prob. 1PS Ch. 9 - Prob. 2PS Ch. 9 - Prob. 3PS Ch. 9 - Prob. 4PS Ch. 9 - Prob. 5PS Ch. 9 - Prob. 6PS Ch. 9 - Prob. 7PS Ch. 9 - Prob. 8PS Ch. 9 - Prob. 9PS Ch. 9 - Prob. 10PS

whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

Solution Summary: The author explains that a risk free stock such as T-bills has beta of zero as their return will not change due to change in the market return.

Concept explainers

Videos

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.

Want to see the full answer?

Chapter 9 Solutions

whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

Solution Summary: The author explains that a risk free stock such as T-bills has beta of zero as their return will not change due to change in the market return.

Concept explainers

Videos

To determine: whether following statement is true or false- "Stock with Beta of zero offers an expected rate of return of zero." Introduction: Beta of a stock represents the sensitivity of its return with the change in the market return.

(C) To determine: whether following statement is true or false- "You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio." Introduction: Beta of the portfolio is the weighted average beta.

Want to see the full answer?

Chapter 9 Solutions

To determine:

whether following statement is true or false-

"Stock with Beta of zero offers an expected rate of return of zero."

Introduction:

Beta of a stock represents the sensitivity of its return with the change in the market return.

(C)

To determine:

whether following statement is true or false-

"You can construct a portfolio with beta of 0.75 by investing 0.75 of the investment budget in T-bills and remainder in the market portfolio."

Introduction:

Beta of the portfolio is the weighted average beta.