Question
In: Finance
Risk and Return Use the following data to explore the risk-return relation and the concept of...
Risk and Return
Use the following data to explore the risk-return relation and the concept of beta for Apple stock, Kroger stock, and the S&P 500 market index:
|
Year |
Apple Stock Price |
Kroger Stock Price |
S&P 500 Market Index |
|
2020 |
$252.92 |
$30.71 |
3,234.85 |
|
2019 |
$156.23 |
$27.66 |
2,531.94 |
|
2018 |
$169.23 |
$27.32 |
2,753.15 |
|
2017 |
$125.17 |
$29.52 |
2,276.98 |
|
2016 |
$108.41 |
$31.80 |
2,043.94 |
|
2015 |
$112.98 |
$33.37 |
2,058.20 |
Part 2: Required Return
|
Market risk premium: RPM = |
5.60% |
|
Risk-free rate: rRF = |
0.70% |
- Calculate the expected return on the market according to: Expected Return on Market = Risk-Free Rate + Market Risk Premium. Also calculate the required return for Apple and Kroger according to: Required Return = Risk-Free Rate + (Beta)(Market Risk Premium). (10 Points)
|
Expected return on the market: rm = |
|
|
Apple Required Return = |
|
|
Kroger Required Return = |
- If you formed a portfolio that consisted of 60% Apple stock and 40% Kroger stock, calculate the beta. (10 Points)
|
Beta |
Portfolio Weight |
|
|
Apple |
||
|
Kroger |
||
|
Portfolio Beta |
- Calculate the portfolio beta of the four-stock portfolio and the required return on the portfolio. (10 Points)
|
Beta |
Portfolio Weight |
||
|
Apple |
25% |
||
|
Kroger |
15% |
||
|
Stock D |
1.52 |
40% |
|
|
Stock C |
1.42 |
20% |
|
|
Portfolio Beta = |
|||
|
Risk-free rate |
Market Risk Premium |
Portfolio Beta |
Required Return on Portfolio |
Solutions
Expert Solution
The formulas and the inputs used is as follows:
The result is as follows:
jeff jeffy answered 3 years agoRelated Solutions
Risk and Return Use the following data to explore the risk-return relation and the concept of...
Risk and Return
Use the following data to explore the risk-return relation and
the concept of beta for Apple stock, Kroger stock, and the S&P
500 market index:
Year
Apple Stock Price
Kroger Stock Price
S&P 500 Market Index
2020
$252.92
$30.71
3,234.85
2019
$156.23
$27.66
2,531.94
2018
$169.23
$27.32
2,753.15
2017
$125.17
$29.52
2,276.98
2016
$108.41
$31.80
2,043.94
2015
$112.98
$33.37
2,058.20
Part 1: Risk and Beta
Calculate the return each year for Apple, Kroger, and the
Market using...
Use the following data to explore the risk-return relation and the concept of beta for Apple...
Use the following data to explore the risk-return relation and
the concept of beta for Apple stock, Alphabet (Google) stock, and
the S&P 500 market index:
Year
Apple Stock Price
Alphabet Stock Price
S&P 500 Market Index
2017
$174.09
$1,072.01
2,601.42
2016
$115.82
$807.80
2,238.83
2015
$105.26
$765.84
2,043.94
2014
$113.99
$521.51
2,058.90
2013
$80.01
$559.76
1,848.36
2012
$72.80
$358.17
1,426.19
Market risk premium: RPM =
4.01%
Risk-free
rate: rRF =
1.30%
Calculate the portfolio beta of the four-stock portfolio...
Use the following data to explore the risk-return relation and the concept of beta for Apple...
Use the following data to explore the risk-return relation and
the concept of beta for Apple stock, Alphabet (Google) stock, and
the S&P 500 market index:
Year
Apple Stock Price
Alphabet Stock Price
S&P 500 Market Index
2017
$174.09
$1,072.01
2,601.42
2016
$115.82
$807.80
2,238.83
2015
$105.26
$765.84
2,043.94
2014
$113.99
$521.51
2,058.90
2013
$80.01
$559.76
1,848.36
2012
$72.80
$358.17
1,426.19
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Use the following data to explore the return-risk relation and
the concept of beta for Apple stock, JPMorgan Chase & Co stock,
and the S&P 500 market index:
Year | Apple Stock Price | JPMorgan Chase & Co Stock Price |
S&P 500 Market Index Value
2017 | $149.04 | $93.85 | 2,425.17
2016 | $95.89 | $59.60 | 2,102.94
2015 | $124.50 | $68.25 | 2,076.79
2014 | $94.03 | $57.05 | 1,960.96
2013...
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discuss the concept of risk and diversification in relation to
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explain the concept of risk and return using the friedman savage
hypothesis
The relationship between risk and return is an important concept as it has numerous implications for...
The relationship
between risk and return is an important concept as it has numerous
implications for both corporate managers and investors. Corporate
managers assess the risk and return of new projects or investments.
Investors assess the risk and return of financial assets before
making investment decisions.
Discussion
Questions:
Explain the risk and
return trade-off.
Describe the
differences between systematic risk and unsystematic risk.
Provide examples of
systematic risk and unsystematic risk.
How both risks are
measured?
Which risk is more...
Explain the relation between risk and return Describe the two components of a total holding period...
Explain the relation between risk and return
Describe the two components of a total holding period return,
and calculate this return for an asset
Explain what an expected return is and calculate the expected
return for an asset
Explain what the standard deviation of returns is and why it is
very useful in finance, and calculate it for an asset
Explain the concept of diversification
Discuss which type of risk matters to investors and why
Describe what the Capital Asset...
How do you measure the expected return & risk of a portfolio? How the concept of...
How do you measure the expected return & risk of a
portfolio? How the concept of correlation between asset returns is
used in portfolio diversification? Explain.
Everyone is probably aware of the overall concept of risk and return. We are well aware...
Everyone is probably aware of the overall concept of risk and
return. We are well aware of the "painful" side of risks present in
our investments or 401k plans. However, we want to broaden our
awareness that "risk" is not necessarily a bad word. In other
words, we want to take a look at risk balance.
For your initial post discuss the concept of "no risk, no
return" and its corollary "high risk, high return". How does risk
appetite relate...
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