Question
Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2012 14% 12%
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
| Year | Stock X | Stock Y | Market |
| 2012 | 14% | 12% | 13% |
| 2013 | 20 | 7 | 10 |
| 2014 | -18 | -5 | -13 |
| 2015 | 5 | 1 | 1 |
| 2016 | 19 | 9 | 13 |
Assume that the risk-free rate is 6% and the market risk premium is 6%. Do not round intermediate calculations.
- 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. __________
- 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. ____________%
- 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. ____________ %
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Project Financing Asset-Based Financial Engineering
Authors: John D Finnerty
3rd Edition
1118421841, 9781118421840
