Question
In: Finance
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 |
E) 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 Alphabet according to: Required Return = Risk-Free Rate + (Beta)(Market Risk Premium) (9 Points)
| Expected return on the market: rm = | |
| Apple Required Return = | |
| Alphabet Required Return = |
| Market risk premium: RPM = | 4.01% |
| Risk-free rate: rRF = | 1.30% |
Solutions
Expert Solution
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ALL EXCEL FORMULAS ARE PROVIDED, CELL REFERENCES ARE PROVIDED
BETA IS TAKEN TILL 4
DECIMALS FOR ACCURATE ANSWER
jeff jeffy answered 2 years agoRelated Solutions
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...
Risk and Return Use the following data to explore the risk-return relation and the concept of...
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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...
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...
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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...
A project has a beta of 1.3. The risk-free return is 2% and the return on...
A project has a beta of 1.3. The risk-free return is 2% and
the return on the market is 12%. The project has an IRR of
14%.
a) If the firm’s cost of capital is 10%, will they take the
project using the cost of capital?
b) Using the CAPM to determine project risk, will they take
the project?
c) Which method is better for analyzing this project?
Why?
Portfolio Risk and Return Given the following portfolio Stock Amount (MV) Beta Return CAPM A $10,000...
Portfolio Risk and
Return
Given the following
portfolio
Stock
Amount (MV)
Beta
Return
CAPM
A
$10,000
1.1
13.50%
B
$5,000
1.4
14.00%
C
$6,000
1.5
7.50%
D
$13,000
0.7
8.50%
E
$16,000
1.9
19.80%
Total
$50,000
Risk free rate
3.00%
market return
12.00%
Portfolio return
Portfolio beta
Portfolio CAPM
Portfolio Beta and Expected Return Assume that CAPM holds and that both Apple and Yahoo...
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Assume that CAPM holds and that both Apple and Yahoo plot on the
SML. Apple has a beta of 2.6 and Yahoo has a beta of 0.9. The
expected return on the market portfolio is 9.25% and the risk-free
rate is 1.0%.
Based on the above data, what is the expected return for Apple?
(Express your answer in percentage, rounded to 2 decimal
places.)
The expected return for Apple (in
%):
Show the formula...
What is Beta and how can we use Beta to measure risk?
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Beta and required rate of return A stock has a required return of 12%; the risk-free...
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2.5%; and the market risk premium is 3%.
What is the stock's beta? Round your answer to two decimal
places.
B. If the market risk premium increased to 9%, what would happen
to the stock's required rate of return? Assume that the risk-free
rate and the beta remain unchanged.
1. If the stock's beta is equal to 1.0, then the change in...
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discuss the concept of risk and diversification in relation to
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