Fill in the missing values in the table. (Leave no cells blank - be certain to...
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Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Security Firm A Firm B Firm C The market portfolio The risk-free asset Expected Return 0.115 0.135 0.116 0.12 0.05 Standard Deviation 0.26 0.71 0.20 Correlation* 0.45 0.30 Beta 0.91 1.46 *With the market portfolio. b-1. According to the CAPM, what is the expected return of Firm A's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-2. What is your investment recommendation for someone with a well-diversified portfolio? b-3. According to the CAPM, what is the expected return of Firm B's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-4. What is your investment recommendation for someone with a well-diversified portfolio? b-5. According to the CAPM, what is the expected return of Firm C's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Security Firm A Firm B Firm C The market portfolio The risk-free asset Expected Return 0.115 0.135 0.116 0.12 0.05 Standard Deviation 0.26 0.71 0.20 Correlation* 0.45 0.30 Beta 0.91 1.46 *With the market portfolio. b-1. According to the CAPM, what is the expected return of Firm A's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-2. What is your investment recommendation for someone with a well-diversified portfolio? b-3. According to the CAPM, what is the expected return of Firm B's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-4. What is your investment recommendation for someone with a well-diversified portfolio? b-5. According to the CAPM, what is the expected return of Firm C's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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To calculate the expected return of each firms stock using the Capital Asset Pricing Model CAPM we c... View the full answer
Related Book For
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
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