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Suppose that borrowing is restricted so that the zero-beta version of the CAPM holds. The expected...
Suppose that borrowing is restricted so that the zero-beta version of the CAPM holds. The expected return on the market...
Suppose that borrowing is restricted so that the zero-beta version of the CAPM holds. The expected return on the market portfolio is 13%, and on the zero-beta portfolio it is 4%. What is the expected return on a portfolio with a beta of 0.8? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected return
Problem 13-20 Using CAPM (L04) A stock has a beta of 1.60 and an expected return...
Problem 13-20 Using CAPM (L04) A stock has a beta of 1.60 and an expected return of 10 percent. A risk-free asset currently earns 2.4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of.88, what are the portfolio weights? (Do...
Problem 13-20 Using CAPM [LO4] A stock has a beta of 1.50 and an expected return...
Problem 13-20 Using CAPM [LO4] A stock has a beta of 1.50 and an expected return of 14 percent. A risk-free asset currently earns 2 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % b. If a portfolio of the two assets has a beta of .84, what are the...
CAPM, PORTFOLIO RISK, AND RETURN Consider the following information for stocks A, B, and C. The...
CAPM, PORTFOLIO RISK, AND RETURN Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 8.74% 16% 0.9 B 9.57 16 1.1 C 11.64 16 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5%, and...
Using CAPM Suppose that CAPM holds, and so E(r;) = r, +B; *(E(rw)-r.) The expected market...
Using CAPM Suppose that CAPM holds, and so E(r;) = r, +B; *(E(rw)-r.) The expected market return (S&P500) is 14% and T-bill rate (risk-free) is 5%. - What is the expected return on a stock with B = 0? - What is the expected return on a stock with B = 1? • What is the expected return on a portfolio made up of 50% T- bills and 50% market portfolio? - What is the expected return on stock with...
Problem 11-12 Using CAPM A stock has a beta of 1.10, the expected return on the...
Problem 11-12 Using CAPM A stock has a beta of 1.10, the expected return on the market is 12 percent, and the risk-free rate is 3.6 percent. What must the expected return on this stock be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %
6. Assume the CAPM with risk-free lend- ing but no risk-free borrowing. Suppose the return on...
6. Assume the CAPM with risk-free lend- ing but no risk-free borrowing. Suppose the return on the market portfolio is 9 percent, and the return on a zero beta folio is 5 percent. You have combined two assets in a portfolio with equal weights. The expected returns on the two assets are 7 percent and 15 percent. What is the beta of this portfolio? port- (а). О.50 (b). 0.67 (с). 1.50 (d). 2.75
6. Assume CAPM holds: Are the following true or false? a. Stocks with a beta of...
6. Assume CAPM holds: Are the following true or false? a. Stocks with a beta of zero offer an expected rate of return of zero. b. The CAPM implies that investors require a higher return to hold highly volatile securities. c. You can construct a portfolio with beta of 75 by investing.75 of the investment budget in T-bills and the remainder in the market portfolio.
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.20 .89 Expected Return...
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.20 .89 Expected Return .130 .103 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,...
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.30 .140 Repete Co....
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.30 .140 Repete Co. .99 .113 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Suppose that borrowing is restricted so that the zero-beta version of the CAPM holds. The expected return on the market portfolio is 13%, and on the zero-beta portfolio it is 4%. What is the expected return on a portfolio with a beta of 0.8? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected return
Problem 13-20 Using CAPM (L04) A stock has a beta of 1.60 and an expected return of 10 percent. A risk-free asset currently earns 2.4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of.88, what are the portfolio weights? (Do...
CAPM, PORTFOLIO RISK, AND RETURN Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 8.74% 16% 0.9 B 9.57 16 1.1 C 11.64 16 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5%, and...
Using CAPM Suppose that CAPM holds, and so E(r;) = r, +B; *(E(rw)-r.) The expected market return (S&P500) is 14% and T-bill rate (risk-free) is 5%. - What is the expected return on a stock with B = 0? - What is the expected return on a stock with B = 1? • What is the expected return on a portfolio made up of 50% T- bills and 50% market portfolio? - What is the expected return on stock with...
6. Assume the CAPM with risk-free lend- ing but no risk-free borrowing. Suppose the return on the market portfolio is 9 percent, and the return on a zero beta folio is 5 percent. You have combined two assets in a portfolio with equal weights. The expected returns on the two assets are 7 percent and 15 percent. What is the beta of this portfolio? port- (а). О.50 (b). 0.67 (с). 1.50 (d). 2.75
6. Assume CAPM holds: Are the following true or false? a. Stocks with a beta of zero offer an expected rate of return of zero. b. The CAPM implies that investors require a higher return to hold highly volatile securities. c. You can construct a portfolio with beta of 75 by investing.75 of the investment budget in T-bills and the remainder in the market portfolio.
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.20 .89 Expected Return .130 .103 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,...
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