+ 1. Use the following information to answer the questions. Security Beta Standard Deviation Expected return...
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+ 1. Use the following information to answer the questions. Security Beta Standard Deviation Expected return S&P 500 1.0 20% 8.0% Risk-free security 0.0 0% 4.0% Stock A 0.6 15% ( )% Stock B ( ) 30% 12.0% Stock C 1.2 25% ( )% 1) Figure out the market risk premium using S&P 500 and Risk-free security. (10points) 2) Figure out the expected return for Stock A using CAPM. (15points) 3) Figure out the beta for Stock B using CAPM. (15points) 4) Stock C has an average return of 10%. Figure out the following. i) Figure out the expected return using CAPM. (15points) ii) Figure out the abnormal return, alpha (a). (15points) iii) Determine whether you buy or sell Stock C based on the alpha. (10points) + 1. Use the following information to answer the questions. Security Beta Standard Deviation Expected return S&P 500 1.0 20% 8.0% Risk-free security 0.0 0% 4.0% Stock A 0.6 15% ( )% Stock B ( ) 30% 12.0% Stock C 1.2 25% ( )% 1) Figure out the market risk premium using S&P 500 and Risk-free security. (10points) 2) Figure out the expected return for Stock A using CAPM. (15points) 3) Figure out the beta for Stock B using CAPM. (15points) 4) Stock C has an average return of 10%. Figure out the following. i) Figure out the expected return using CAPM. (15points) ii) Figure out the abnormal return, alpha (a). (15points) iii) Determine whether you buy or sell Stock C based on the alpha. (10points)
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Answer To figure out the market risk premium we subtract the riskfree rate from the expected return ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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