Question
In: Finance
Below are returns on the stock A and S&P500 index. All numbers are in decimals (-0.0222...
Below are returns on the stock A and S&P500 index. All numbers are in decimals (-0.0222 is equivalent to -2.22%).
| A | S_P500 |
| -0.0222 | 0.0032 |
| -0.0048 | -0.0058 |
| 0.1333 | 0.0434 |
| 0.0765 | 0.1081 |
| -0.0161 | -0.0121 |
| 0.1250 | 0.1400 |
| 0.0145 | 0.0368 |
| -0.0475 | -0.0454 |
| 0.0430 | 0.0577 |
| -0.0260 | -0.1374 |
| 0.0071 | 0.0064 |
| 0.0249 | 0.0186 |
| 0.0850 | 0.0215 |
| -0.0624 | -0.0752 |
| 0.0933 | 0.0365 |
| 0.0456 | 0.0528 |
| -0.0632 | -0.0131 |
| 0.0450 | 0.0009 |
| 0.0200 | 0.0017 |
| 0.0280 | 0.0985 |
Suppose that the next S&P500 return will be 7%. Use the CAPM model to calculate the expected return on the stock A. Assume the risk-free rate of 1%.
Please write an answer in decimals. For example, 12.34% would be
0.1234.
Also, round your answer to the fourth decimal.
Solutions
Expert Solution
Expected return on Stock A using CAPM model = Risk free rate + Beta * Market risk premium
Risk free rate = 1%
Market risk premium = 7% - 1% = 6%
Beta = 0.6577
Expected return on stock A = 1% + 0.6577*(6%) = 4.9462 % = 0.0494
Formulae
jeff jeffy answered 10 months agoRelated Solutions
Below are returns on the stock A and S&P500 index. All numbers are in decimals (-0.0222...
Below are returns on the stock A and S&P500 index. All
numbers are in decimals (-0.0222 is equivalent to -2.22%).
A
S_P500
-0.0222
0.0032
-0.0048
-0.0058
0.1333
0.0434
0.0765
0.1081
-0.0161
-0.0121
0.1250
0.1400
0.0145
0.0368
-0.0475
-0.0454
0.0430
0.0577
-0.0260
-0.1374
0.0071
0.0064
0.0249
0.0186
0.0850
0.0215
-0.0624
-0.0752
0.0933
0.0365
0.0456
0.0528
-0.0632
-0.0131
0.0450
0.0009
0.0200
0.0017
0.0280
0.0985
Assuming normal distribution, what is the probability that the
next S&P500 return will be greater than 0?
Please...
Below are returns on the stock A and S&P500 index. All numbers are in decimals (-0.0222...
Below are returns on the stock A and S&P500 index. All
numbers are in decimals (-0.0222 is equivalent to -2.22%).
A
S_P500
-0.0222
0.0032
-0.0048
-0.0058
0.1333
0.0434
0.0765
0.1081
-0.0161
-0.0121
0.1250
0.1400
0.0145
0.0368
-0.0475
-0.0454
0.0430
0.0577
-0.0260
-0.1374
0.0071
0.0064
0.0249
0.0186
0.0850
0.0215
-0.0624
-0.0752
0.0933
0.0365
0.0456
0.0528
-0.0632
-0.0131
0.0450
0.0009
0.0200
0.0017
0.0280
0.0985
What is the sample standard deviation of the stock A
returns?
Please write an answer in decimals. For...
Below are returns on the stock A and S&P500 index. All numbers are in decimals (-0.0222...
Below are returns on the stock A and S&P500 index. All
numbers are in decimals (-0.0222 is equivalent to -2.22%).
A
S_P500
-0.0222
0.0032
-0.0048
-0.0058
0.1333
0.0434
0.0765
0.1081
-0.0161
-0.0121
0.1250
0.1400
0.0145
0.0368
-0.0475
-0.0454
0.0430
0.0577
-0.0260
-0.1374
0.0071
0.0064
0.0249
0.0186
0.0850
0.0215
-0.0624
-0.0752
0.0933
0.0365
0.0456
0.0528
-0.0632
-0.0131
0.0450
0.0009
0.0200
0.0017
0.0280
0.0985
Assuming normal distribution, what is the probability that the
next stock A return will be less than 0?...
Use the following 5-year sample on annual returns on S&P500 index and XYZ to calculate XYZ's...
Use the following 5-year sample on annual returns on S&P500
index and XYZ to calculate XYZ's Coecient of Variation, Sharpe
ratio, and Beta. The yield-to-maturity on one-year T-Bills is
2%.
Year S&P500 XYZ
2014 0.01 0.02
2015 0.06 0.11
2016 0.02 0.05
2017 0.005 -0.01
2018 0.01 0.02
Collect recent data on the stock market index (for e.g., either S&P500 or DJIA or TASI)...
Collect recent data on the stock market index (for e.g., either
S&P500 or DJIA or TASI) for a period covering a few months. Try
to identify primary trends using the technical analysis stats
discussed in the class. Can you tell whether the market currently
is in an upward or downward trend?
Compute the total return on all of these in the respective market: 1. The S&P500 stock...
Compute the total return on all of these in the respective
market:
1. The S&P500 stock index closes at 2250 at the end of
March. At the end of June, the index closes at
2475. Assume the S&P500 has a divided yield of 3%
annually.
2. The S&P500 stock index closes at 2500 at the end of
December. The following June, the index
closes at 2400. Assume the S&P500 has a divided yield of 2%
annually.
3. A Treasury bond...
You are an options trader with an investment bank. It appears that the S&P500 index will...
You are an options trader with an investment bank. It appears
that the S&P500 index will trade between 2700 and 2500 for the
next few months. How can you use options to create a profitable
investment opportunity?
1 )Please explain in detail.
2) Show the payoff and profit in a graph.
You are an options trader with an investment bank. It appears that the S&P500 index will...
You are an options trader with an investment bank. It appears
that the S&P500 index will trade between 2700 and 2500 for the
next few months. How can you use options to create a profitable
investment opportunity? Show the payoff and profit in a graph.
Here are the total returns for the S&P500 for the first ten years of this century....
Here are the total returns for the S&P500 for the first ten
years of this century. Assume you invested $1 in the S&P500 on
January 1, 2001. Your first year's return was -11.85%.
Year Return
2001 -11.85%
2002 -21.97%
2003 28.36%
2004 10.74%
2005 4.83%
2006 15.61%
2007 5.48%
2008 -36.55%
2009 26.94%
2010 18.00% 4 points.
Q1. If you invested $1 at the beginning of the time frame
[1/1/2001], how much would it be worth five years later? Show...
Month Monthly Returns (%) Month Monthly Returns (%) Month Monthly Returns (%) Ended Yahoo Google S&P500...
Month
Monthly Returns (%)
Month
Monthly Returns (%)
Month
Monthly Returns (%)
Ended
Yahoo
Google
S&P500
Ended
Yahoo
Google
S&P500
Ended
Yahoo
Google
S&P500
Dec-07
-13.241
-0.219
-0.692
Dec-06
-5.442
-5.018
1.403
Dec-05
-2.610
2.457
0.036
Nov-07
-13.794
-1.980
-4.182
Nov-06
2.544
1.767
1.899
Nov-05
8.818
8.806
3.778
Oct-07
15.861
24.632
1.590
Oct-06
4.193
18.534
3.257
Oct-05
9.249
17.595
-1.668
Sep-07
18.093
10.096
3.736
Sep-06
-12.314
6.174
2.575
Sep-05
1.561
10.650
0.810
Aug-07
-2.237
1.029
1.497
Aug-06
6.227
-2.087
2.376...
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