Homework Answers
Answer - Progressive Stock, it has higher volatility
Volatility is signified by the standard deviation of the returns. Now, standard deviation also denotes the total risk of a standalone risk of an investment, without taking into impact the diversification.
Hence, higher the standard deviation (or volatility), higher will be the total risk which includes both systematic and non-systematic components.
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Question 9 O out of 2 points Suppose that you expect Progressive's stock to have a volatility of 30% and a beta of...
Suppose that Wal-Mart (WMT) to has a Beta of 1.1 and a volatility of 30% and...
Suppose that Wal-Mart (WMT) to has a Beta of 1.1 and a volatility of 30% and that Exxon Mobil (XOM) has a Beta of 0.9 and a volatility of 50%. Which stock has more systematic risk? Which stock has more total risk One year from now, Indiana Publishing is expected to pay a $4.25 dividend on its common stock. After that time, the dividend is expected to grow by 6% per year forever. If the firm’s equity cost of capital...
You expect General Motors (GM) to have a beta of 1.5 over the next year and...
You expect General Motors (GM) to have a beta of 1.5 over the next year and the bets of Exxon Mobi (XOM) to be 1.9 over the next year. Also, you expect the volatility of General Motors to be 50% and that of Exxon Mobil to be 35% over the next year. Which stock has more systematic risk? Which stock has more total risk? OA XOM, GM Охом хом OC. GM, OM OD. GM, XOM
Stock A has an annual expected return of 8%, a beta of .9, and a firm-specific...
Stock A has an annual expected return of 8%, a beta of .9, and a firm-specific volatility of 50% Stock B has an annual expected return of 9%, a beta of 1.3, and a firm-specific volatility of 40% The market has a standard deviation of 20%, and the risk-free rate is is 2%. Suppose we construct a portfolio built out of 50% stock A, 30% stock B, and 20% government t-bills. What is the expected return of this portfolio? (in...
please answer 6. Calculating a beta coefficient for a single stock Aa Aa Suppose that the...
please answer
6. Calculating a beta coefficient for a single stock Aa Aa Suppose that the standard deviation of returns for a single stock A is σΑ-30%, and the standard deviation of the market return is 얘-10%. If the correlation between stock A and the market is ρΑΜ-0.3, then the stock's beta is Is it reasonable to expect that the volatility of the market portfolio's future expected returns will be greater than the volatility of stock A's returns? O Yes...
please answer 6. Calculating a beta coefficient for a single stock Aa Aa Suppose that the...
please answer
6. Calculating a beta coefficient for a single stock Aa Aa Suppose that the standard deviation of returns for a single stock A is σΑ-30%, and the standard deviation of the market return is 얘-10%. If the correlation between stock A and the market is ρΑΜ-0.3, then the stock's beta is Is it reasonable to expect that the volatility of the market portfolio's future expected returns will be greater than the volatility of stock A's returns? O Yes...
please work all parts. 2. Stock A has expected return of 14% and volatility 30%. Stock...
please work all parts.
2. Stock A has expected return of 14% and volatility 30%. Stock B has expected return of 8% and volatility 19%. The correlation between two stocks is -0.2. The risk free interest rate is 4% (a) Find the expected returns, volatilities, and Sharpe ratios of portfolios that maintain 100.0% investment in Stock A and 100(1-x)% in Stock B, where x is given in the following table. Volatility Expected return Sharpe ratio 0.8 0.9 1.0 (b) How...
Question 4(14 marks) What is the risk premium of a zero-beta stock?Does this mean you can...
Question 4(14 marks) What is the risk premium of a zero-beta stock?Does this mean you can lower the volatility of a portfolio without changing the expected return by substituting out any zero-beta stock in a portfolio and replacing it with the risk-free asset? (4 marks) Assume all investors want to hold a portfolio that, for a given level of volatility, has the maximum possible expected return. Explain why, when a risk-free asset exists, all investors will choose to hold the same...
uestion 7 O out of 2 points You expect Canyon Buff Corp wil have earnings per...
uestion 7 O out of 2 points You expect Canyon Buff Corp wil have earnings per share of this year and expect that they will pay out $150 of these earnings to shareholders in the form of a dividend. Canyon Buff's x return on new investments is 15 and their equity cost of capital is 12%. The value of a share of Canyon Buff's stock is closest to Selected Answer: D. $12.50 Question 8 O out of 2 points
Question 4 [3 points) Suppose that the Capital Asset Pricing Model (CAPM) holds. The market portfolio...
Question 4 [3 points) Suppose that the Capital Asset Pricing Model (CAPM) holds. The market portfolio has an expected return of 9% and a standard deviation of 16%. Stock AAA has an expected return of 12%, a beta of 1.4, and a standard deviation of 28%. a. What is the risk-free rate? [1 point] b. What is the alpha of stock AAA? [1 point) c. What proportion of the total risk of stock AAA is idiosyncratic? [1 point]
You must choose between investing in Stock A or Stock B. You have already used CAPM...
You must choose between investing in Stock A or Stock B. You have already used CAPM to calculate the rate of return you should expect to receive for each stock given each one's systematic risk and decided that the expected return for both exceeds that predicted by CAPM by the same amount. In other words, both are equally attractive investments for a diversified investor. However, since you are still in school and do not have a lot of money, your...
You expect General Motors (GM) to have a beta of 1.5 over the next year and the bets of Exxon Mobi (XOM) to be 1.9 over the next year. Also, you expect the volatility of General Motors to be 50% and that of Exxon Mobil to be 35% over the next year. Which stock has more systematic risk? Which stock has more total risk? OA XOM, GM Охом хом OC. GM, OM OD. GM, XOM
please answer
6. Calculating a beta coefficient for a single stock Aa Aa Suppose that the standard deviation of returns for a single stock A is σΑ-30%, and the standard deviation of the market return is 얘-10%. If the correlation between stock A and the market is ρΑΜ-0.3, then the stock's beta is Is it reasonable to expect that the volatility of the market portfolio's future expected returns will be greater than the volatility of stock A's returns? O Yes...
please answer
6. Calculating a beta coefficient for a single stock Aa Aa Suppose that the standard deviation of returns for a single stock A is σΑ-30%, and the standard deviation of the market return is 얘-10%. If the correlation between stock A and the market is ρΑΜ-0.3, then the stock's beta is Is it reasonable to expect that the volatility of the market portfolio's future expected returns will be greater than the volatility of stock A's returns? O Yes...
please work all parts.
2. Stock A has expected return of 14% and volatility 30%. Stock B has expected return of 8% and volatility 19%. The correlation between two stocks is -0.2. The risk free interest rate is 4% (a) Find the expected returns, volatilities, and Sharpe ratios of portfolios that maintain 100.0% investment in Stock A and 100(1-x)% in Stock B, where x is given in the following table. Volatility Expected return Sharpe ratio 0.8 0.9 1.0 (b) How...
uestion 7 O out of 2 points You expect Canyon Buff Corp wil have earnings per share of this year and expect that they will pay out $150 of these earnings to shareholders in the form of a dividend. Canyon Buff's x return on new investments is 15 and their equity cost of capital is 12%. The value of a share of Canyon Buff's stock is closest to Selected Answer: D. $12.50 Question 8 O out of 2 points
Question 4 [3 points) Suppose that the Capital Asset Pricing Model (CAPM) holds. The market portfolio has an expected return of 9% and a standard deviation of 16%. Stock AAA has an expected return of 12%, a beta of 1.4, and a standard deviation of 28%. a. What is the risk-free rate? [1 point] b. What is the alpha of stock AAA? [1 point) c. What proportion of the total risk of stock AAA is idiosyncratic? [1 point]
You must choose between investing in Stock A or Stock B. You have already used CAPM to calculate the rate of return you should expect to receive for each stock given each one's systematic risk and decided that the expected return for both exceeds that predicted by CAPM by the same amount. In other words, both are equally attractive investments for a diversified investor. However, since you are still in school and do not have a lot of money, your...
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