Question

In: Finance

4.) Consider the expected return for two stocks in two different market conditions:    Market Return...

4.) Consider the expected return for two stocks in two different market conditions:   

Market Return

Aggressive Stock

Defensive Stock

8%

5%

6%

20%

34%

14%

a. What are the betas of the two stocks?

b. What is the expected rate of return on each stock if the market return is equally likely to be 8% or 20%?

c. What are the alphas of each?

Solutions

Expert Solution

ANSWER IN THE IMAGE((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

jeff jeffy answered 3 years ago
Next > < Previous

Related Solutions

Expected return on two stocks for two particular market returns:                         Market Return      
Expected return on two stocks for two particular market returns:                         Market Return             Aggressive Stock          Defensive Stock                              4%                               -5%                              6%                20%                             30%                             15% What are the betas of the two stocks? What is the expected rate of return on each stock if the market return is equally likely to be 4% or 20%? If the T-bill rate is 5% and the market return is equally likely to be 4% or 20%, draw the SML for this economy. Please...
Expected return on two stocks for two particular market returns: Market return/Aggressive stock/Defensive St        4%                 &nbsp
Expected return on two stocks for two particular market returns: Market return/Aggressive stock/Defensive St        4%                     -5%                         6%        20%                   30%                       15% a. What are the beta's of the two stocks? b. What is the expected rate of return on each stock if the market return is equally likely to be 4% or 20%? c. If the t-bill rate is 5% and the market return is equally likely to be 4% or 20%, draw the SML for this economy. please...
Expected return on two stocks for two particular market returns: Market Return Aggressive Stock Defensive Stock...
Expected return on two stocks for two particular market returns: Market Return Aggressive Stock Defensive Stock 2% -5% 3% 22% 35% 15% a. What are the betas of the two stocks? b. What is the expected rate of return on each stock if the market return is equally likely to be 2% or 22%? c. If the T-bill rate is 3% and the market return is equally likely to be 2% or 22%, draw the SML for this economy. d....
Consider the following table, which gives a security analyst's expected return on two stocks In two particular scenarios for the rate of return on the market:
Problem 9-9 Consider the following table, which gives a security analyst's expected return on two stocks In two particular scenarios for the rate of return on the market: Market Return Aggressive Stock Defensive Stock   7%   -4%       4%253513Aggressive Stock Market Return 7% Defensive Stock -4% 25 13 a. What are the betas of the two stocks? b. What is the expected rate of return on each stock if the two scenarios for the market return are equally likely to be 7% or 25%? e. What hurdle rate...
Consider the following table, which gives a security analyst’s expected return on two stocks in two particular scenarios for the rate of return on the market.
Consider the following table, which gives a security analyst’s expected return on two stocks in two particular scenarios for the rate of return on the market. Assume that both scenarios are equally likely to happen (i.e., probability of scenario 1 = probability of scenario 2=0.5).ScenariosMarket ReturnAggressive StockDefensive Stock15%−2%6%225 %38%12%What are the betas of the two stocks? Plot the two securities on the SML graph. Assume that T-bill rate is 6%. What are the alphas of each? 
You are analysing four different stocks. The expected market return is 10% with a standard deviation...
You are analysing four different stocks. The expected market return is 10% with a standard deviation of 20%. The risk free-rate is 2%. Assume the Capital Asset Pricing Model (CAPM) holds and you base your conclusion completely on CAPM. Indicate in the table below which of the following securities is underpriced, overpriced or correctly priced. Security Expected Return Standard Deviation Beta Price? Omega 16% 25% 1.5 Psi 5% 3% 0.5 Chi 10% 17% 1.2 Phi 6% 4% 0.3
What is the Standard deviation ? Consider two stocks, Stock D, with an expected return of...
What is the Standard deviation ? Consider two stocks, Stock D, with an expected return of 13 percent and a standard deviation of 31 percent, and Stock I, an international company, with an expected return of 16 percent and a standard deviation of 42 percent. The correlation between the two stocks is –0.10. What are the expected return and standard deviation of the minimum variance portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2...
Consider the following table, which gives a security analyst’s expected return on two stocks in two...
Consider the following table, which gives a security analyst’s expected return on two stocks in two particular scenarios for the rate of return on the market: Market Return Aggressive Stock Defensive Stock 5 % –3 % 4 % 24 36 9 a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Agressive stock: Defensive stock b. What is the expected rate of return on each stock if the two...
Consider the following table, which gives a security analyst’s expected return on two stocks in two...
Consider the following table, which gives a security analyst’s expected return on two stocks in two particular scenarios for the rate of return on the market: Market Return Aggressive Stock Defensive Stock 6 % –4 % 3 % 21 34 9 a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Beta Aggressive stock Defensive stock b. What is the expected rate of return on each stock if the...
Consider the following table, which gives a security analyst’s expected return on two stocks in two...
Consider the following table, which gives a security analyst’s expected return on two stocks in two particular scenarios for the rate of return on the market: Market Return Aggressive Stock Defensive Stock 6 % –4 % 3 % 21 34 9 a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Beta Aggressive Stock Defensive Stock b. What is the expected rate of return on each stock if the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT