Suppose you estimate that Costco’s stock has a volatility of 15% and a beta of 0.15....

Suppose you estimate that Costco’s 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 market’s 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?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Suppose Wesley? Publishing's stock has a volatility of 65%?, while Addison? Printing's stock has a volatility...

Suppose Wesley? Publishing's stock has a volatility of 65%?, while Addison? Printing's stock has a volatility of 25%. If the correlation between these stocks is 40%?, what is the volatility of the following portfolios of Addison and? Wesley: a. 100% Addison b. 75% Addison and 25% Wesley c. 50% Addison and 50% Wesley

Suppose you are trying to estimate the equity beta of a pink sheet stock using daily...

Suppose you are trying to estimate the equity beta of a pink sheet stock using daily data. Pink sheets are stocks with tiny market capitalizations (sometimes called “microcaps” or “nanocaps”) that trade infrequently in over-the-counter markets and not on exchanges. Explain why your beta estimate is likely biased, and how.

Suppose Bank of America Stock has a beta of 1.32, whereas Boeing Stock has a beta...

Suppose Bank of America Stock has a beta of 1.32, whereas Boeing Stock has a beta of 1.23. If the risk-free interest rate is 1.78% and the expected return of the market portfolio is 10%, according to the CAPM? A. What is the expected return of Bank of America Stock? (Please Show Calculations - No excel please) B. What is the expected return of Boeing Stock? (Please Show Calculations - No excel please) C. What is the beta of a...

Suppose Intel stock has a beta of 1.54 whereas Boeing stock has a beta of 0.99...

Suppose Intel stock has a beta of 1.54 whereas Boeing stock has a beta of 0.99 If the? risk-free interest rate is 5.2 % and the expected return of the market portfolio is 12.5 % according to the? CAPM, a. What is the expected return of Intel? stock? b. What is the expected return of Boeing? stock? c.What is the beta of a portfolio that consists of 55 % Intel stock and 45 % Boeing? stock? d. What is the...

Suppose Intel stock has a beta of 1.6, whereas Boeing stock has a beta of 1....

Suppose Intel stock has a beta of 1.6, whereas Boeing stock has a beta of 1. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, according to the CAPM, What is the expected return of Intel stock? What is the expected return of Boeing stock? What is the beta of a portfolio that consists of 60% Intel stock and 40% Boeing stock? What is the expected return of a portfolio that consists...

Suppose Intel stock has a beta of 1.72, whereas Boeing stock has a beta of 0.78....

Suppose Intel stock has a beta of 1.72, whereas Boeing stock has a beta of 0.78. If the risk-free interest rate is 4.2% and the expected return of the market portfolio is 13.4%, according to the CAPM, a. What is the expected return of Intel stock? b. What is the expected return of Boeing stock? c. What is the beta of a portfolio that consists of 60% intel stock and 40% Boeing stock? d. What is the expected return of...

Suppose Intel stock has a beta of 1.52, whereas Boeing stock has a beta of 0.88....

Suppose Intel stock has a beta of 1.52, whereas Boeing stock has a beta of 0.88. If the risk-free interest rate is 4.1% and the expected return of the market portfolio is 12.2%, according to the CAPM, a. What is the expected return of Intel stock? b. What is the expected return of Boeing stock? c.What is the beta of a portfolio that consists of 70 % Intel stock and 30% Boeing stock? d. What is the expected return of...

Suppose Intel stock has a beta of 1.7, whereas Boeing stock has a beta of 0.91....

Suppose Intel stock has a beta of 1.7, whereas Boeing stock has a beta of 0.91. If the risk-free interest rate is 5.9% and the expected return of the market portfolio is 12.5%, according to the CAPM, a. What is the expected return of Intel stock? b. What is the expected return of Boeing stock? c. What is the beta of a portfolio that consists of 60% Intel stock and 40% Boeing stock? d. What is the expected return of...

Betas: Stock Volatility Conceptual Overview: Explore how stock volatility relates to the beta coefficient b risk...

Betas: Stock Volatility Conceptual Overview: Explore how stock volatility relates to the beta coefficient b risk measure. The tendency of a stock to move with the market is measured by its beta coefficient, b. When first loaded, the graph shows the line for an average stock, which necessarily matches the market return. In a year when the market returns 10%, the average stock returns 10%. And in a year when the market goes down -10%, the average stock goes down...

Stock A has a beta of 1.5, but Stock B has a beta of 0.5. You...

Stock A has a beta of 1.5, but Stock B has a beta of 0.5. You expect the market to increase by 7.5 percent and you could earn 2.0 percent in a risk-free asset. What is the required return for each stock? If you invest $3,500 in Stock A and $6,500 in Stock B, what is the portfolio beta?

Subjects