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Suppose you estimate that Costcos stock has a volatility of 15% and a beta of 0.15. A similar analysis for Target yields a volatility of
Suppose you estimate that Costcos stock has a volatility of 15% and a beta of 0.15. A similar analysis for Target yields a volatility of 12% and a beta of 0.4. Moreover, suppose the risk-free interest rate is 3% and you estimate the markets expected return to be 9%, and volatility to be 12%. (YOU MUST SHOW YOUR WORK TO RECEIVE FULL CREDIT) (a) Which stock carries more total risk? (b) Which stock has more systematic risk? (c) Which stock has more idiosyncratic risk? (d) Which company has a higher expected return?
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