Question

In: Finance

A portfolio has a market beta of 0.8, a factor loading of 1 to SMB and...

A portfolio has a market beta of 0.8, a factor loading of 1 to SMB and a sensitivity of -2 to HML. The portfolio has earned 16% return. What was the abnormal return on the portfolio, if the risk free rate was 0%, market's excess return was 8%, the SMB factor premium was -10% and the HML factor premium was -4%?

22%

16.2%

4.4%

11.6%

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

A portfolio has a market beta of 0.8, a factor loading of 1 to SMB and...
A portfolio has a market beta of 0.8, a factor loading of 1 to SMB and a sensitivity of -2 to HML. The portfolio has earned 16% return. What was the abnormal return on the portfolio, if the risk free rate was 0%, market's excess return was 8%, the SMB factor premium was -10% and the HML factor premium was -4%? 22% 16.2% 4.4% 11.6%
When the result of beta market and beta smb and beta hml more than 1 ,...
When the result of beta market and beta smb and beta hml more than 1 , what does it indicate? When it will become significant ? Is it good if its less than 2 or more than 2 ? Explain
PORTFOLIO BETA An individual has $45,000 invested in a stock with a beta of 0.8 and...
PORTFOLIO BETA An individual has $45,000 invested in a stock with a beta of 0.8 and another $30,000 invested in a stock with a beta of 2.5. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal places.
The beta for Cowboy Industries, Inc. is 0.8. The expected return on the market portfolio is...
The beta for Cowboy Industries, Inc. is 0.8. The expected return on the market portfolio is 12.0% and the risk-free rate is 2.0%. If the CAPM/SML is correct, what is Cowboy Manufacturing’s required (expected) return?
5. Market Equilibrium: Bingo Inc. has a beta of 0.8, a market price of $30, and...
5. Market Equilibrium: Bingo Inc. has a beta of 0.8, a market price of $30, and recently paid a dividend of $2.00 which is expected to grow at a constant rate of 3%. The risk-free rate is 2% and the market risk premium is 6%. a. Compute the required rate of return on Bingo stock. b. Compute the expected return on Bingo stock. c. Compute the dividend yield and capital gains yield for Bingo’s stock. d. Is Bingo’s stock in...
Suppose the stock in Watta Corporation has a beta of 0.8. The market risk premium is...
Suppose the stock in Watta Corporation has a beta of 0.8. The market risk premium is 6 percent, and the risk-free rate is 3 percent. Watta’s dividend will be $1.20 per share next year and the dividend is expected to grow at 6 percent indefinitely. The stock currently sells for $45 per share. What is Watta’s cost of equity by the CAPM? ______% What is Watta’s cost of equity by the dividend growth model? ______% Suppose the market values of...
Suppose you are managing an equity portfolio with a beta of 0.8 and $15M in assets....
Suppose you are managing an equity portfolio with a beta of 0.8 and $15M in assets. S&P 500 index futures with a multiplier of 250 (not the e-mini futures) are currently priced at 1,057, and the index is also 1,057. What position in index futures is necessary to increase the portfolio beta to 1.4?
Consider the multifactor APT with two factors. Portfolio A has a beta of 1.5 on factor...
Consider the multifactor APT with two factors. Portfolio A has a beta of 1.5 on factor 1 and a beta of 0.45 on factor 2. The risk premiums on the factor 1 and 2 portfolios are 12% and 5%, respectively. The risk-free rate of return is 3%. The expected return on portfolio A is Answer if no arbitrage opportunities exist.
Consider a single factor APT. Portfolio A has a beta of 1.5 and an expected return...
Consider a single factor APT. Portfolio A has a beta of 1.5 and an expected return of 24%. Portfolio B has a beta of 0.9 and an expected return of 13%. The risk-free rate of return is 4%. An arbitrage portfolio in which you take a position in a combination of the highest beta portfolio and the risk-free asset, and an opposite position in the other risky portfolio would generate a rate of return of ______%.
Consider the single factor APT. Portfolio A has a beta of 1.1 and an expected return...
Consider the single factor APT. Portfolio A has a beta of 1.1 and an expected return of 23%. Portfolio B has a beta of .6 and an expected return of 19%. The risk-free rate of return is 6%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _________. A;B B;A B;B A;A
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT