Question
In: Finance
Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Aggressive Defe...
Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D.
a. Find the beta of each stock. (Round your answers to 2 decimal places.)
b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. (Enter your answers as a whole percent.)
c. If the T-bill rate is 4%, what does the CAPM say about the fair expected rate of return on the two stocks? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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....
Expected return on two stocks for two particular market returns: Market return/Aggressive stock/Defensive St 4%  
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...
Consider the following two scenarios for the economy and the expected returns in each scenario for...
Consider the following two scenarios for the economy and the
expected returns in each scenario for the market portfolio, an
aggressive stock A, and a defensive stock D. Rate of Return
Scenario Market Aggressive Stock A Defensive Stock D
Bust –8 % –13 % –6 %
Boom 26 35 19 Required:
a. Find the beta of each stock.
b. If each scenario is equally likely, find the expected rate of
return on the market portfolio and on each stock.
c....
Consider the following two scenarios for the economy and the expected returns in each scenario for...
Consider the following two scenarios for the economy and the
expected returns in each scenario for the market portfolio, an
aggressive stock A, and a defensive stock D.
Rate of Return
Scenario
Market
Aggressive
Stock A
Defensive
Stock D
Bust
–8
%
–10
%
–5
%
Boom
30
40
22
Required:
a. Find the beta of each stock.
b. If each scenario is equally likely, find the
expected rate of return on the market portfolio and on each
stock.
c....
Consider the following two scenarios for the economy and the expected returns in each scenario for...
Consider the following two scenarios for the economy and the
expected returns in each scenario for the market portfolio, an
aggressive stock A, and a defensive stock D.
Rate of Return
Scenario
Market
Aggressive
Stock A
Defensive
Stock D
Bust
–6
%
–12
%
–4
%
Boom
15
36
10
a. Find the beta of each stock. (Round
your answers to 2 decimal places.)
b. If each scenario is equally likely, find the
expected rate of return on the market...
onsider the following two scenarios for the economy and the expected returns in each scenario for...
onsider the following two scenarios for the economy and the
expected returns in each scenario for the market portfolio, an
aggressive stock A, and a defensive stock D.
Rate of Return
Scenario
Market
Aggressive
Stock A
Defensive
Stock D
Bust
–7
%
–10
%
–5
%
Boom
19
25
15
a. Find the beta of each stock. (Round
your answers to 2 decimal places.)
b. If each scenario is equally likely, find the
expected rate of return on the market...
The following are the expected returns on a portfolio of investments. What is the expected rate of return on the portfolio?
The following are the expected returns on a portfolio of investments. What is the expected rate of return on the portfolio? Investment # of shares Price per share Expected returnA. 2000 $20 10%B. 3000 $10 15%C. 1000 $15 8%
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?
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...
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