A stock with a beta of zero would be expected to have a rate of return equal to Group of answer choices the risk-free rate the market rate of return the market risk premium zero
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A stock with a beta of zero would be expected to have a
Group of answer choices
the risk-free rate
the market rate of return
the market risk premium
zero
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- The additional return over the risk-free rate needed to compensate investors for assuming an average amount of risk. a. Market Risk Premium b. Risk-free rate С. Stock's beta O d. Security Market Line e. Required Return on StockQUESTION 1 Exhibit 5.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Stock Rit Rmt ai Beta A 10.6 15 0 0.8 Z 9.8 8.0 0 1.1 Rit = return for stock i during period t Rmt = return for the aggregate market during period t Refer to Exhibit 5.5. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk)? a. 4.40 b. −1.70 c. 3.40 d. −4.40 e. −1.86Q6-Suppose that the rate of return on investment- free has risk %8 and the expected return rate for the market %14. If the particular stock his given B = 0.60 - What is the expected return rate based on CAPM? -How much the Beta of another stock that has required return 0.20 ?
- USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Stock Rit Rmt ai Beta C 12 10 0 0.8 E 10 8 0 1.1 Rit = return for stock i during period t Rmt = return for the aggregate market during period t What is the abnormal rate of return for Stock C during period t using only the aggregate market return (ignore differential systematic risk)?1. Problem 8.01 (Expected Return) A stock's returns have the following distribution: Demand for theCompany's Products Probability of thisDemand Occurring Rate of Return ifthis Demand Occurs Weak 0.1 (22%) Below average 0.2 (14) Average 0.3 13 Above average 0.3 27 Strong 0.1 47 1.0 Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:A stock with a beta of zero would be expected to a. have a rate of return equal to one b. have a rate of return equal to the market rate c. have a rate of return equal to zero d. have a rate of return equal to the risk-free rate
- E(FAssume that using the Security Market Line (SML) the required rate of return (RA) on stock A is found to be half of the required return (Rs) on stock B. The risk-free rate (R;) is one-fourth of the required return on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A (BA) to beta of B (BB). a oWhat is the required return for each stock? What is required return for stock B? Scenario Probability Stock A Stock B Market Risk-free rate Bust 0.25 -0.15 -0.05 Normal 0.55 0.2 0.1 Boom 0.2 0.4 0.3 Beta 1.2 0.9 Expected return 0.13 0.05Question: Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is found to be half of the required return (RB) on stock B. The risk-free rate (Rf) is one-fourth of the required return on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A to beta of B.
- 3. The following information is given with respect to stock A: Scenario Probability Market return 1 0.1 -0.18 2 0.3 0.07 3 0.4 0.16 4 0.2 0.21 Knowing that the Rfis 0.07 compute alpha and the information ratio. Portfolio P return -0.32 0.00 0.22 0.40Problem 1 You are given the following information about stock X and the market portfolio, M: Riskless Asset (f) Stock X Market Portfolio (M) E(r) 0.04 (4%) ? 0.10 σ 0.00 0.30 0.20 You are not given the expected return of stock X. The correlation of the returns on the stock X and the market portfolio is equal to 0.4. a) What is the beta (6) of stock X? b) Assuming the CAPM holds, what is the expected return on stock X? c) You have $1,000 to invest in some combination of the risk-free asset, stock X, and the market portfolio. You are thinking of investing $300 in the risk free asset, $400 in stock X, and $300 in the market portfolio. What is the overall expected return, standard deviation and beta of this portfolio?1. A stock with a beta of zero would be expected to have a rate of return equal to a. the risk-free rate b. the market risk premium c. zero d. the market rate of return 2. If an individual stock's beta is higher than 1.0, that stock is: a. riskier than the market. b. always the most attractive to investors. c. less risky than the market. d. exactly as risky as the market. 3. If Brewer Corporation's bonds are currently yielding 8% in the marketplace, why is the firm's cost of debt lower? a. Market interest rates have increased. b. Additional debt can be issued more cheaply than the original debt. c. Interest is deductible for tax purposes. d. There should be no difference; cost of debt is the same as the bonds' market yield.