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Problem 6-14 Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2009
Problem 6-14 Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year | Stock X | Stock Y | Market |
2009 | 16% | 15% | 11% |
2010 | 18 | 6 | 11 |
2011 | -12 | -6 | -10 |
2012 | 5 | 3 | 1 |
2013 | 20 | 8 | 16 |
Assume that the risk-free rate is 5% 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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