(7) Calculate the Beta of stocks “A” and “B” from the following data Market Return 9%...
. (Portfolio beta and security market line) You own a portfolio consisting of the following stocks The risk-free rate is 4 percent. Also, the expected return on the market portfolio is 9 percent. a. Calculate the expected return of your portfolio (Hint: The expected return of a portfolio equals the weighted average of the individual stocks' expected returns where the weights are the percentage invested in each stock.) b. Calculate the portfolio beta. c. Given the foregoing information, plot the...
9. Consider the following two stocks: State Normal Boom Probability 80% 20% Return on Stock A 26% 22% Return on Stock B 12% 44% Stock A has a beta of 0.4, and Stock B's beta is 3.8. The risk-free rate is 3.2% and the return on the market portfolio is 12.4%. Which has the least systematic risk: Stock A or Stock B, or a portfolio formed with 15% of Stock A and 85% of Stock B? Please show all of...
Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?A BRequired return 10% 12%Market price $25 $40Expected growth 7% 9%These two stocks should have the same price.These two stocks must have the same dividend yield.These two stocks should have the same expected return.These two stocks must have the same expected capital gains yield.These two stocks must have the same expected year-end dividend.
7-20. Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Year 2011 2012 2013 2014 2015 Stock X Stock Y Market 14% 13% 12% 19 7 10 - 16 -5 -12 3 s11 20 11 15 - Assume that the risk-free rate is 4%, the market risk premium is 5%, the beta for Stock X is 1.50, and the beta for Stock Y is 0.46: a. What are the required rates of return...
RISK & RETURN. For this and the next question. The following is a historical dataset for Stocks 1 and 2 as well as the market portfolio. Which of the following is true regarding the betas of the stocks? Note: the beta calculation function on Excel is =SLOPE. You can also obtain beta using the Regression option in Data Analysis. Year Stock 1 Stock 2 Market 1 15% 2% 12% 2 21% -3% 15% 3 -5% 1% 3% 4 -7% 5%...
Stocks A and B have the following data as attached. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?StockABPrice of stock$25$40Expected growth of dividend7%9%Expected rate of return10%12%A) B's expected dividend is $0.75. B) A's expected dividend is $0.50. C) B's expected dividend is $0.50. D) A's expected dividend is $0.75. E) The two stocks should have the same expected dividend or D1.
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 15% 0.60 26% B 23 1.15 38 The market index has a standard deviation of 21% and the risk-free rate is 9%. a. What are the standard deviations of stocks A and B? (Do not round intermediate calculations. Enter your responses as decimal numbers rounded to 2 decimal places). Stock A Stock B b. Suppose that we were...
2. Consider the following expected return on two stocks for two particular market returns: With probability 1/2 the market return is equal to 4%, return of stock A is 1% and B is 6%. With probability 1/2 the market return is equal to 20%, return of stock A is 33% and B is 10%. (Hint: these are realizations and not expected values, you should calculate the expected returns using the given probabilities and returns) (a) What is the expected rate...
Consider the following expected return on two stocks for two particular market returns: With probability 1/2 the market return is equal to 4%, return of stock A is 1% and B is 6%. With probability 1/2 the market return is equal to 20%, return of stock A is 33% and B is 10%. (Hint: these are realizations and not expected values, you should calculate the expected returns using the given probabilities and returns) (a) What is the expected rate of...
Given the following information, calculate the expected return for the portfolio of stocks A and B. (Answer to the nearest tenth of a percent, but do not use a percent sign). Amount Expected Invested Return Stock A $3,000 19% Stock B $6,000 15%