Question
Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2012 16% 12%
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
| Year | Stock X | Stock Y | Market |
| 2012 | 16% | 12% | 14% |
| 2013 | 18 | 6 | 8 |
| 2014 | -16 | -4 | -14 |
| 2015 | 5 | 2 | 3 |
| 2016 | 21 | 11 | 16 |
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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Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
10th edition
77861671, 978-0077861674
