Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2-7: The Relationship between Risk and Return in the Capital Asset Pricing Model Problem 2-14 Historical Returns: Expected and Required Rates of Return You have
2-7: The Relationship between Risk and Return in the Capital Asset Pricing Model Problem 2-14 Historical Returns: Expected and Required Rates of Return You have observed the following returns over time Stock X 12% 21 -14 2 18 Market Year 2011 2012 2013 2014 2015 Stock Y 14% 14% 12 8 8 16 Assume that the risk-free rate is 6% and the market risk premium is 7%. Do not round intermediate calculations a. What is the beta of Stock X? Round your answer to two decimal places What is the beta of Stock Y? Round your answer to two decimal places b. What is the required rate of return on Stock X? Round your answer to one decimal place What is the required rate of return on Stock Y? Round your answer to one decimal place c, what is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to one decimal place 2-7: The Relationship between Risk and Return in the Capital Asset Pricing Model Problem 2-14 Historical Returns: Expected and Required Rates of Return You have observed the following returns over time Stock X 12% 21 -14 2 18 Market Year 2011 2012 2013 2014 2015 Stock Y 14% 14% 12 8 8 16 Assume that the risk-free rate is 6% and the market risk premium is 7%. Do not round intermediate calculations a. What is the beta of Stock X? Round your answer to two decimal places What is the beta of Stock Y? Round your answer to two decimal places b. What is the required rate of return on Stock X? Round your answer to one decimal place What is the required rate of return on Stock Y? Round your answer to one decimal place c, what is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to one decimal place
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started