Homework Answers
1.
=5%+0*(14%-5%)=5%
2.
=5%+1*(14%-5%)=14%
3.
=5%+0.5*(14%-5%)=9.50%
4.
=5%-0.1*(14%-5%)=4.1%
5.
Moving opposite to the market such as gold mining firms
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Using CAPM Suppose that CAPM holds, and so E(r;) = r, +B; *(E(rw)-r.) The expected market...
Suppose that CAPM holds. Let Rf denote the risk free rate, E(RM) the expected return of the...
Suppose that CAPM holds. Let Rf denote the risk free rate, E(RM) the expected return of the market portfolio, and sigmaMthe standard deviation of the market portfolio. Now consider some portfolio on the capital market line, with expected return E(R) and standard deviation sigma. What is the beta of this portfolio? Select one: 1. E(R)/sigma 2. sigmaM/sigma 3. sigma/sigmaM 4. E(RM)-Rf
5. Assume CAPM holds: The market price of a security is $50. Its expected rate of...
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3. Expected return and CAPM Suppose the risk-free rate is 4% and the market portfolio and...
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3. Expected return and CAPM Suppose the risk-free rate is 4% and the market portfolio and...
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CAPM data: Market portfolio: Risk-free asset: Om = 0.2 E[RM]=18%, R, = 6% T-bills are also...
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Question 8 Suppose the CAPM holds, given the following information: market portfolio's expected return = 896 risk-free rate = 496 Canyon Buff's beta = 1.5 then expected return for Canyon Buffs stock is closest to? Selected Answer: B. 16.096
Assume a setting in which the risk-free rate is 4% and the CAPM holds. The market...
Assume a setting in which the risk-free rate is 4% and the CAPM holds. The market portfolio has a mean return of 16% and a return standard deviation of 30%. The data on two stocks that exist in this market are as follows. Stock X has a mean return of 10% and a standard deviation of 40%. Stock Y has a mean return of 20% and a standard deviation of 50%. The pair of stocks have a return correlation of...
CAPM For a risky return r, CAPM equation is Er -r- B(E[rm] -r), where r is risk-free rate, Tm is ...
CAPM For a risky return r, CAPM equation is Er -r- B(E[rm] -r), where r is risk-free rate, Tm is market return, and is loading of risky return r on market return rm In what follows, X and Y denote arbitrary assets, B risk-free bond, M market portfolio. Determine which of the following scenarios are consistent or inconsistent with mean-variance efficiency (that is, CAPM). In your answer, write "Consistent" or "Inconsistent", and give brief explanation. 25% 12% 0.8 1.2 25...
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3. Expected return and CAPM Suppose the risk-free rate is 4% and the market portfolio and stock j have the following return distributions: Probability in tot Market return -.15 .05 .15 .20 Return for i --30 .00 .20 .50 a. Find the expected market return, Im. b. Find the variance of the market return, c. Find the expected return for stock j, r;. d. Find the covariance of j and the market, Oim. e. What is J's beta?
3. Expected return and CAPM Suppose the risk-free rate is 4% and the market portfolio and stock j have the following return distributions: Probability in tot Market return -.15 .05 .15 .20 Return for i --30 .00 .20 .50 a. Find the expected market return, Im. b. Find the variance of the market return, c. Find the expected return for stock j, r;. d. Find the covariance of j and the market, Oim. e. What is J's beta?
CAPM data: Market portfolio: Risk-free asset: Om = 0.2 E[RM]=18%, R, = 6% T-bills are also available. They are considered riskless and have a corresponding rate of return. You have $20,000 to invest. a) What are Br-Bills, and 07-Bills? (1 mark) b) Consider Portfolio X comprised of T-Bills and a $25,000 investment in the market portfolio i) Find 0,- (1 mark) ii) Solve for Br. (1 marks) c) Determine the weights of T-Bills and the market portfolio that combined would...
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Question 8 Suppose the CAPM holds, given the following information: market portfolio's expected return = 896 risk-free rate = 496 Canyon Buff's beta = 1.5 then expected return for Canyon Buffs stock is closest to? Selected Answer: B. 16.096
Assume a setting in which the risk-free rate is 4% and the CAPM holds. The market portfolio has a mean return of 16% and a return standard deviation of 30%. The data on two stocks that exist in this market are as follows. Stock X has a mean return of 10% and a standard deviation of 40%. Stock Y has a mean return of 20% and a standard deviation of 50%. The pair of stocks have a return correlation of...
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