A pension fund currently invests in five different stocks as follows: Stock A B C D E Invested Amount $2 mil $3 mil $2 mil $2 mil $1 mil beta 1.7 Expected Return 7% 15.5% 4.5% 12% 14.5% It is assumed that the CAPM holds, and the market is in equilibrium. The beta of the portfolio is 0.76. Fill in the blanks.
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- CAPM As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return CAPM Beta 1.20 0.80 9.0% 10.0 a. If the risk-free rate is 3.9 percent and the expected market risk premium (E(RM)-RFR) is 6.1 percent, calculate the required return for each mutual fund according to the CAPM. b. Using the estimated required of returns from part (a) along with your return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?Assume that the financial markets are in equilibrium. Information on three particular shares is provided in the table below. Find the risk free rate and the expected return on the market portfolio. Asset A B C A. 6%, 18% B. 6%, 14% C. 5%, 18% D. 7%, 16% E. 5%, 14% Expected Return 7.6% 12.4% 15.6% Beta 0.2 0.8 1.2As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 f the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ.
- As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return 9.0% 10.0 CAPM Beta 1.20 0.80 a) If the risk-free rate is 3.9 % and the expected market risk premium is 6.1%, calculate the expected return for each mutual fund according to the CAPM. b) Using the estimated expected returns from Part a along with your own return forecasts, explain whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. Are Funds T and U overvalued, undervalued, or properly valued?A $33,622 portfolio is invested in a risk-free security and two stocks. The beta of Stock A is 2.1 while the beta of Stock B is 0.84. One-half of the portfolio is invested in the risk-free security. How much (in $) is invested in Stock A if the beta of the portfolio is 0.56? Answer to two decimalsAs an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U}: Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?
- Which one of the following stocks is correctly priced if the risk-free rate of return is 3.0 percent and the market risk premium is 7.5 percent? Expected Return 8.46% Stock A B с D E 0000С Stock A O Stock D Stock C O Stock E Beta 77 1.46 1.27 1.44 .95 Stock B 12.47 11.19 13.80 8.65An investor plans to invest funds in the following stocks: Stock Beta Amount Invested A 1.39 $1,939.00 B 1.21 $2,818.00 C 0.75 $1,378.00 The risk-free rate is currently 3.00%, while the market risk premium is 6.00%. What is the beta of this portfolio?please help!
- Assume that the risk-free rate is 2.5% and the market risk premium is 8%. What is the required return for the overall stock market? Round your answer to one decimal place. ? % What is the required rate of return on a stock with a beta of 0.5? Round your answer to one decimal place. ? % The above is a two part question, therefore the second answer is determined based off the first answer provided. Please, please, please do provide both answers.Suppose we have the following information: Securit Amount Invested Expected Return Beta Stock A RM1 ,OOO 8% 0.80 Stock B RM2,OOO 12% 0.95 Stock C RM3,OOO 15% 1.10 Stock D RM4,OOO 18% a) Compute the expected return on this portfolio. b) Calculate the beta of the portfolio. c) Does this portfolio have more or less systematic risk than an average asset? Explain.. The following questions are related to modern portfolio theory. • Assume there are only two stocks in the equity market. •The risk-free rate is 1.00%. Stock Return Volatility Correlation Matrix Y 0.7 1.0 X Y X 15.00% 20.00% 1.0 10.00% 15.00% 0.7 (a) Make an investment portfolio using the risky assets that has an expected return 12%. (b) Calculate the volatility of the portfolio in (a).