Question

You have observed the following returns over time YearStock X Stock Y Market 2012 2013 2014 2015 2016 13% 1496 19 16 12% 10 12 20 15 Assume that the risk-free rate is 6% and the market risk premium is 5%. a. What are the betas of Stocks X and Y? Answer b. What are the required rates of return on Stocks X and Y? Answer C. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Answer

Answer 1

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Home nert Page Layout Formulas Data Review View dd-Ins s Cut aCopy Σ AutoSum ー E " ゴWrap Text в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Alignment Number Cells Edting AB AC AD AE AF AG AH Al AK 40 STOCK X 42 43 (R(M)-E(R(M)))A2 DA2 YEAR R(X) R(X) ER(X R(M) R(M)-ER(M) BD 12 10 12 6.8 4.8 17.2 40.8 52.8 412.8 21 46.24 23.04 295.84 17.64 96.04 45 46 47 48 49 50 51 52 53 54 19 16 4 15 5.2 20 12 9.8 ER(X) ER(M)- COV(R(x), R(M)) 645 VAR(RM)- 478.80 BETA (X)- COV(R(X),R(M))/VAR (R(M) BETA (X) 1.35 645/478.8 56 57 58 /4 l , PV FV DIVIDEND . EMV , MEAN STDV DEAR Sheet2 | COV TIME SERIES Corr REGRESSION CAMERAEXP RETURN MATRIK INTERVAL, NORMALHY 福 130% 05-01-2019

Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E " ゴWrap Text aCopy B 1 u. ,_a. ars-函Merge & Center, $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting, as Table w styles. ▼ ㆆ ▼ Sort &Find & 2 ClearFe Select Edting Format Painter Clipboard Alignment Number AG78 AB AC AD AE AF AG AH Al AK STOCK Y 61 62 63 64 65 (R(M)-E(R(M)))A2 DA2 YEAR R(Y) R(Y) ER(Y R(M) R(M)-ER(M) BD 12 10 12 6.8 4.8 17.2 51.68 7.68 178.88 18.48 54.88 46.24 23.04 295.84 17.64 96.04 67 68 69 70 71 72 73 74 75 76 -10.4 5.6 15 5.2 9.8 ER(Y) 5.4 ER(M)- cov(R(Y), R(M)) = 311.6 VAR(RM)- 478.80 BETA (Y)-COV(R(X),R(M))/VAR (R(M) BETA (Y) 0.6508 311.6/478.8 BETA (X) BETA (Y)- 1.3471 0.6508 ANSWER a 78 79 DEAR Sheet2 COVTIME SERIES corr REGRESSION CAMERAEXP RETURN MATRIK INTERVAL, NORMALHY 福 130% 05-01-2019