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% -7% 5 10% 3% 8%
RISK & RETURN. For this and the next question. The following is a historical dataset for...
Which of the following statements are correct? 1. If you found a stock with zero historical beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio 2. the Beta coefficient of a stock is normally found by regressing past returns on a stock against pat market returns. if a stock has a beta of 1.0, then its required rate of return would be equal to the risk free rate of return...
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...
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk
and Rates of Return: Risk in Portfolio Context The capital asset
pricing model (CAPM) explains how risk should be considered when
stocks and other assets are held . The CAPM states that any stock's
required rate of return is the risk-free rate of return plus a risk
premium that reflects only the risk remaining diversification. Most
individuals hold stocks in portfolios. The risk of a stock held in...
Assume the risk-free rate is 4.1% and expected market return is 10.2%. Suppose that you have observed the following returns over time: Year Stock A Stock B Market 2012 5% 14% 12% 2013 7% 15% 10% 2014 -9% -17% -12% 2015 1.5% 3% 1% 2016 10% 18% 15% 2017 17.5% 24.5% 20% What are the betas of Stock A and Stock B? What are the required rate of returns of Stocks A and B? What is the required rate of...
Assignment 08 - Risk and Rates of Return 5. Portfolio risk and return Aa Aa Aa Ariel holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following table: Stock Omni Consumer Products Co. (OCP) Zaxatti Enterprises (ZE) Water and Power Co. (WPC) Flitcom Corp. (FC) Investment $2,625 $1,500 $1,125 $2,250 Beta 0.90 1.30 1.15 0.40 Standard Deviation 12.00% 11.50% 18.00% 19.50% Suppose all stocks in...
Assignment 08 - Risk and Rates of Return 5. Portfolio risk and return Aa Aa Elle holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following table: Stock Omni Consumer Products Co. (OCP) Zaxatti Enterprises (ZE) Water and Power Co. (WPC) Makissi Corp. (MC) Investment $2,625 $1,500 $1,125 $2,250 Beta 0.90 1.30 Standard Deviation 9.00% 11.00% 18.00% 1.10 0.30 19.50% Suppose all stocks in Elle's...
Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Market Stock Y 13% 11% Year 2014 2015 2016 2017 2018 Stock X 13% 18 -15 10 -10 Assume that the risk-free rate is 7% and the market risk premium is 5%. a. What are the betas of stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places Stock X: Stock Y: b. What are the required rates...
Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Stock y 13% Market 13% Year 2014 2015 2016 2017 2018 Stock X 15% 17 -12 -4 3 2 -12 3 18 Assume that the risk-free rate is 4% and the market risk premium is 3%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: b. What...
Here are some historical data on the risk characteristics of
Ford and Harley Davidson.
Ford
Harley Davidson
β (beta)
1.62
0.80
Yearly standard deviation of return (%)
30.0
16.5
Assume the standard deviation of the return on the market was
17.0%.
a. The correlation coefficient of Ford’s return
versus Harley Davidson is 0.30. What is the standard deviation of a
portfolio invested half in each share?
b. What is the standard deviation of a
portfolio invested one-third in Ford, one-third...
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....