Historical Returns: Expected and Required Rates of Return You have observed the following returns over time:...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2014 16% 11% 10% 2015 17 5 12 2016 -13 -6 -14 2017 2018 3 20 3 2 13 18 Assume that the risk-free rate is 7% and the market risk premium is 5%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: % % c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. % Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2014 16% 11% 10% 2015 17 5 12 2016 -13 -6 -14 2017 2018 3 20 3 2 13 18 Assume that the risk-free rate is 7% and the market risk premium is 5%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: % % c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. %
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
A solid of constant density is bounded below by the plane z = 0, on the sides by the elliptical cylinder x 2 + 4y 2 = 4, and above by the plane z = 2 - x. a. Find x and y. b. Evaluate the integral...
-
For what types of parts and production volumes would compression molding be an appropriate process?
-
The late 1980s and early 1990s were a significant time for Eastern Europe. Several national boundaries and political ideologies, as well as the names of a few countries, changed during this period....
-
Which of the following statements regarding budgets is false? a. They are formal documents that quantify a company's plans. b. They enhance communication and coordination. c. They are useful in...
-
The Welding Department of Majestic Company has the following production and manufacturing cost data for February 2014. All materials are added at the beginning of the process. Majestic uses the FIFO...
-
available for RM98,000 each. Earnings after taxation are as follows: Year Machine A (RM) Machine B (RM) 1 35,000 19,000 2 33,000 25,000 3 40,000 33,000 4 24,000 49,000 5 16,000 32,000 By using a...
-
what should you do when preparing a cover letter for a mail survey?
-
You plan to save $320 per month starting today for the next 41 years "just to start the month off right." You feel that you can earn an interest rate of 10.2 percent compounded monthly. How much will...
-
You have just won the lottery and will receive a lump sumpayment of $22.65 million after taxes. Instead of immediately spending your money, you plan to deposit all of the money into an account that...
-
SIMPLE PROCESS COSTING AND INCOMPLETE UNIT (CLOSING) Ultimate Sdn Bhd manufactures organic fertiliser by means of two successive processes, Process A and Process B. Below is the costs involved for...
-
The following is a part of unadjusted trial balance for RAM company which establishment in 0 1 / 0 1 / 2 0 2 0 when authorized to issue 1 , 0 0 0 , 0 0 0 ordinary at par $ 2 and 1 0 0 , 0 0 0 @ 2 0 5...
-
To fund your dream around-the-worldvacation, you plan to save $1,375 per year for the next 11 years starting one year from now. If you can earn an interest rate of 6.01 percent, how much will you...
-
Frosty reported an allowance account of $ 3000 (credit balance) as of December 31 before recording an adjustment for doubtful accounts expense based upon 2% of $ 200,000 accounts receivables. The...
-
Define the essential properties of the following types of operating systems: a. Batch b. Interactive c. Time sharing d. Real time e. Network f. Parallel g. Distributed h. Clustered i. Handheld
-
From the following draw up a bank reconciliation statement from details as on 31 December 19X6: Cash at bank as per bank column of the cash book Unpresented cheques Cheques received and paid into the...
-
The following are extracts from the cash book and the bank statement of J Roche. You are required to: (a) Write the cash book up to date, and state the new balance as on 31 December 19X9, and (b)...
-
Draw up a bank reconciliation statement, after writing the cash book up to date, ascertaining the balance on the bank statement, from the following as on 31 March 19X9: Cash at bank as per bank...
Study smarter with the SolutionInn App