Homework Answers
1. Single index model does not talk about the the large number of stocks to diversify a Portfolio for it also does not talk about the stock systematic risk is unpriced.
single stock model will be calculating the variance of a stock in terms of the beta so the highest of standard deviation, the higher will be its beta
Correct answer would be Option (B)
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9 Question 21 (1 point) ✓ Saved In the single index model we assume which of...
Pinulo retums? 1 0 capital asset pricing model given historical data 2. Consider Table 1. (%)...
Pinulo retums? 1 0 capital asset pricing model given historical data 2. Consider Table 1. (%) 3.77 Table 1 Summary Statistics Alpha, Beta, Expected Return and Variance a/c to the Stocks Sample Single Index Model Covariance Residual and Return Alpha Beta with Market Expected Variance Variance Market (%) (%) Return (%) (%) 3.60 3.59 4.80 Market 4.20 0.00 8.70 (a) Consider Table 1. Using the single index model, calculate beta and alpha for stocks 1 and 2. Interpret your findings....
Assume security returns are generated by the single-index model. R 1 =a 1 + beta 2...
Assume security returns are generated by the single-index
model. R 1 =a 1 + beta 2 R M +e 1 where R 1 is the excess return
for security and R N market’s excess returnThe risk-free rate is 4%
Suppose also that there are three securities A8and characterized by
the following data!
Saved Assume that security returns are generated by the single-index model R; - ei + BiRM + ej where is the excess return for security i and Ry...
Q2 (e) Assume for simplicity sake that one factor has been deemed appropriate to "explain" returns...
Q2
(e) Assume for simplicity sake that one factor has been deemed appropriate to "explain" returns on stocds (0) How and there is no idiosyncratic risk. Derive the arbitrage pricing theory would you perform a test of the predictions of the capital asset pricing model given historical data (APT) model 2. Consider Tablo 1 Return and Variance a/c to the Stocks Sample Covariance Residual AlphaBeta Expected Variance and Return | with Market | Variance | (96) Return Market 3.60 4.80...
6. Calculating a beta coefficient for a single stock Aa Aa E Suppose that the standard...
6. Calculating a beta coefficient for a single stock Aa Aa E Suppose that the standard deviation of returns for a single stock A is A = 40%, and the standard deviation of the market return is OM = 20%. If the correlation between stock A and the market is PAM = 0.7, then the stock's beta is Is it reasonable to expect that the future expected return for a stock will equal its historical average return over a relatively...
Attempt 1/2 for 10 pts. Part 1 The efficient frontier is the subset of feasible portfolios...
Attempt 1/2 for 10 pts. Part 1 The efficient frontier is the subset of feasible portfolios that Check all that apply: maximizes the expected return |offers the minimum standard deviation for given return minimizes the standard deviation |offers the maximum return for a given standard deviation Submit 5%D Outlook 7:44 PM accepi.com Ассері Intro Assume that the single index model is valid. Stock A has a beta of 0.4 and a standard deviation of returns of 40%. The standard deviation...
1. The universe of available securities includes two risky stock funds, A and B and T-bills....
1. The universe of available securities includes two risky stock funds, A and B and T-bills. The data for the universe are as follows: Expected Return Standard Deviation 109 20 Tbilis The correlation coefficient between funds A and B is -0.2. a. Find the optimal risky portfolio, P. and its expected return and standard deviation b. Find the slope of the CAL supported by T-bills and portfolio P. c. How much will an investor with 4-5 invest in funds A...
9. The Capital Asset Pricing Model and the security market line Keith holds a portfolio that...
9. The Capital Asset Pricing Model and the security market line Keith holds a portfolio that is invested equally in three stocks (WD = WA = WI = 1/3). Each stock is described in the following table: Stock Beta Standard Deviation Expected Return DET 0.7 25% 8.0% AIL 1.0 38% 10.0% INO 1.6 13.5% 34% An analyst has used market- and firm-specific information to make expected return estimates for each stock. The analyst's expected return estimates may or may not...
Need ASAP Just Answers Question 36 Based on the capital asset pricing model, which one of...
Need ASAP Just Answers Question 36 Based on the capital asset pricing model, which one of the following must increase the expected return on an individual security, all else constant? Select one: a. An increase in the risk level of that security as measured by the standard deviation b. An increase in the risk-free rate given a security beta of 1.42 c. A decrease in the market rate of return given a security beta of 1.13 d. A decrease in...
e. Figure 1 depicts the expected returns and standard deviations for five assets. Which assets are...
e. Figure 1 depicts the expected returns and standard deviations
for five assets. Which assets are not dominated by any other
asset?
Please answer E, G, H, I. Show work where you can so I can
better understand the solution.
Thanks.
Expected Return Risk (Standard Deviation) Figure 1: Plot for Question 1.e. g. A stock earned annual returns of 10%, 3%, and 12% over three consecutive years. During the same time period, market returns were 5%, 12%, and 8%. What...
Please answer the questions above. Thank you! You manage an index fund that is an exact...
Please answer the questions above. Thank you!
You manage an index fund that is an exact replica of the market index. The market expected annual rate of return is 19.5% with a standard deviation of 16.5%. Annual T-bill rate is 4.5% 2. a. A client of yours wants you to invest 80% of his portfolio in your fund and 20 % in T-bill money market fund. What is the expected return and standard deviation of this client's portfolio? b. What...
Pinulo retums? 1 0 capital asset pricing model given historical data 2. Consider Table 1. (%) 3.77 Table 1 Summary Statistics Alpha, Beta, Expected Return and Variance a/c to the Stocks Sample Single Index Model Covariance Residual and Return Alpha Beta with Market Expected Variance Variance Market (%) (%) Return (%) (%) 3.60 3.59 4.80 Market 4.20 0.00 8.70 (a) Consider Table 1. Using the single index model, calculate beta and alpha for stocks 1 and 2. Interpret your findings....
Assume security returns are generated by the single-index
model. R 1 =a 1 + beta 2 R M +e 1 where R 1 is the excess return
for security and R N market’s excess returnThe risk-free rate is 4%
Suppose also that there are three securities A8and characterized by
the following data!
Saved Assume that security returns are generated by the single-index model R; - ei + BiRM + ej where is the excess return for security i and Ry...
Q2
(e) Assume for simplicity sake that one factor has been deemed appropriate to "explain" returns on stocds (0) How and there is no idiosyncratic risk. Derive the arbitrage pricing theory would you perform a test of the predictions of the capital asset pricing model given historical data (APT) model 2. Consider Tablo 1 Return and Variance a/c to the Stocks Sample Covariance Residual AlphaBeta Expected Variance and Return | with Market | Variance | (96) Return Market 3.60 4.80...
6. Calculating a beta coefficient for a single stock Aa Aa E Suppose that the standard deviation of returns for a single stock A is A = 40%, and the standard deviation of the market return is OM = 20%. If the correlation between stock A and the market is PAM = 0.7, then the stock's beta is Is it reasonable to expect that the future expected return for a stock will equal its historical average return over a relatively...
Attempt 1/2 for 10 pts. Part 1 The efficient frontier is the subset of feasible portfolios that Check all that apply: maximizes the expected return |offers the minimum standard deviation for given return minimizes the standard deviation |offers the maximum return for a given standard deviation Submit 5%D Outlook 7:44 PM accepi.com Ассері Intro Assume that the single index model is valid. Stock A has a beta of 0.4 and a standard deviation of returns of 40%. The standard deviation...
1. The universe of available securities includes two risky stock funds, A and B and T-bills. The data for the universe are as follows: Expected Return Standard Deviation 109 20 Tbilis The correlation coefficient between funds A and B is -0.2. a. Find the optimal risky portfolio, P. and its expected return and standard deviation b. Find the slope of the CAL supported by T-bills and portfolio P. c. How much will an investor with 4-5 invest in funds A...
9. The Capital Asset Pricing Model and the security market line Keith holds a portfolio that is invested equally in three stocks (WD = WA = WI = 1/3). Each stock is described in the following table: Stock Beta Standard Deviation Expected Return DET 0.7 25% 8.0% AIL 1.0 38% 10.0% INO 1.6 13.5% 34% An analyst has used market- and firm-specific information to make expected return estimates for each stock. The analyst's expected return estimates may or may not...
e. Figure 1 depicts the expected returns and standard deviations
for five assets. Which assets are not dominated by any other
asset?
Please answer E, G, H, I. Show work where you can so I can
better understand the solution.
Thanks.
Expected Return Risk (Standard Deviation) Figure 1: Plot for Question 1.e. g. A stock earned annual returns of 10%, 3%, and 12% over three consecutive years. During the same time period, market returns were 5%, 12%, and 8%. What...
Please answer the questions above. Thank you!
You manage an index fund that is an exact replica of the market index. The market expected annual rate of return is 19.5% with a standard deviation of 16.5%. Annual T-bill rate is 4.5% 2. a. A client of yours wants you to invest 80% of his portfolio in your fund and 20 % in T-bill money market fund. What is the expected return and standard deviation of this client's portfolio? b. What...
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