Question
1. a) Scenario Modelers prospective stock has a 15% chance of producing a 65% return, a 25% chance of producing a 22% return, a 40%
1. a) Scenario Modelers prospective stock has a 15% chance of producing a 65% return, a 25% chance of producing a 22% return, a 40% chance of producing a 7% return, and a 20% chance of producing a 28% return. What is the firms coefficient of variation of return?
1. b) High Growths annual stock returns over the last 7 years are: 27%, 18%, 34%, 11%, 28%, 55%, and 15%. What is High Growths standard deviation of return?
1. c) Hedge Funds R Us has a $50 million portfolio consisting of two stocks: Highly Leveraged Retailer (HLR) with a beta of 4.25 and Steady Eddie Utility (SEU) with a beta of 0.85. The risk-free rate is 3.75%, and the market risk premium is 6.50%. If Hedge Funds R Us invests $20 million in HLR and the balance of its funds in SEU, what it the Hedge Fund's required rate of return according to CAPM?
1. d) Deep Value, Inc.s annual stock returns for the last ten years are: 5%, 15%, 11%, 18%, 8%, 9%, 16%, 3%, 2%, and 15%. The Market Indexs annual returns for the same ten years are: 10%, 22%, 9%, 13%, 7%, 8%, 15%, 13%, 12%, and 18%. What is Deep Values beta coefficient?
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