You have been provided the following data about the securities of three firms, themarket portfolio, and the risk-free asseta. Fill in the missing values in the table. (Leave no cells blank be certain to enter Owherever required. Do not round intermediate calculations and round youranswers to 2 decimal places, e.g., 32.16.)SecurityFimm AFim BFim CThe market portfolioThe risk-fres assetExpected retumO BuyO SellExpected retumExpected Return0.1190.131O BuyⒸSell0.1120.120.05With the market portfoliob-1. What is the expected return of Firm A? (Do not round intermediate calculationsand enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.)Expected retumStandard Deviation0.22b-2. What is your investment recommendation regarding Firm A for someone with a well-diversified portfolio?O SellO Buy0.750.19Correlationb-3. What is the expected return of Firm B? (Do not round intermediate calculationsand enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)0.410.26%Batab-4. What is your investment recommendation regarding Firm B for someone with a well-diversified portfolio?b-5. What is the expected return of Firm C? (Do not round intermediate calculationsand enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.)b-6. What is your investment recommendation regarding Firm C for someone with a weldiversified portfolio?0.951.50

The capital asset pricing model aids analysts in calculating the expected return. The idea is that…

a. Fill in the missing values in the table. (Leave no cells blank- be certain to enter O wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g. 32.16.) Fim A The market po The O Buy O Sell Expected num Expected Return 0119 0.131 0112 0.12 0.05 Expected Standard Deviation O Buy O Sell 0.22 With the market portfolio b-1. What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) 0.75 0.19 Correlatee" b-2. What is your investment recommendation regarding Firm A for someone with a well- diversified portfolio? O Sell O Buy 041 0.26 b-3. What is the expected retum of Firm 87 (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, eg, 32.16.) Bata b-4. What is your investment recommendation regarding Firm B for someone with a well- b-5. What is the expected return of Firm C? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) 1.50 b-6. What is your investment recommendation regarding Firm C for someone with a well- diversified portfolio?

a. Fill in the missing values in the table. (Leave no cells blank- be certain to enter O wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g. 32.16.) Fim A The market po The O Buy O Sell Expected num Expected Return 0119 0.131 0112 0.12 0.05 Expected Standard Deviation O Buy O Sell 0.22 With the market portfolio b-1. What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) 0.75 0.19 Correlatee" b-2. What is your investment recommendation regarding Firm A for someone with a well- diversified portfolio? O Sell O Buy 041 0.26 b-3. What is the expected retum of Firm 87 (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, eg, 32.16.) Bata b-4. What is your investment recommendation regarding Firm B for someone with a well- b-5. What is the expected return of Firm C? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) 1.50 b-6. What is your investment recommendation regarding Firm C for someone with a well- diversified portfolio?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

See similar textbooks

Similar questions

You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset: Fill in the missing values in the table. (Leave no cells blank - be certain to enter O wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Security Firm A Firm B Firm C The market portfolio The risk-free asset b-1. Expected Return Expected return 0.118 % 0.132: 0.113 0.12 0.05 Standard Deviation 0.23 0.74 0.23 Correlation* 0.42 0.27 With the market portfolio What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Beta 0.94 1.49
You have been provided the following data on the securities of three firms, the market portfolio, and the risk-free asset: a. Fill in the missing values in the table. (Leave no cells blank - be certain to enter O wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Standard Deviation Security Expected Return Correlation Beta Firm A .118 .23 .94 Firm B .132 .42 1.49 Firm C .113 .74 .27 The market portfolio .12 20 The risk-free asset .es "With the market portfolio. b-1. According to the CAPM, what is the expected return of Firm A's stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return b-2. What is your investment recommendation for someone with a well-diversified portfolio? Sell • Buy b-3. According to the CAPM, what is the expected return of Firm B's stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2…
You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset: a. Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) * With the market portfolio b-1. What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-2. What is your investment recommendation regarding Firm A for someone with a well-diversified portfolio? multiple choice 1 Buy Sell b-3. What is the expected return of Firm B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-4. What is your investment recommendation regarding Firm B for someone with a well-diversified portfolio? multiple choice 2 Sell Buy b-5. What is the expected return of Firm C?…
You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset: a. Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Security Expected Return Standard Deviation Correlation* Beta Firm A 0.120 0.21 0.96 Firm B 0.130 0.40 1.51 Firm C 0.111 0.76 0.25 YOU The market portfolio 0.12 0.21 ma The risk-free asset 0.05 a.
Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML?d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph Please answer A, B, C & D
(c) Which security will you choose to put in your portfolio? Explain. (d) Calculate the covariance and correlation of coefficient for the above securities. (e) Are the above securities being a good combination in the portfolio? Justify. Note: 1Please clear question answer no Whois one (c), (d) & (e) 2. No need excel formula
Please do a and b separate (Question 2) a) Plot the Security Market Line (SML)b) Superimpose the CAPM’s required return on the SMLc) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph.
Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph (
Using the data generated in the graph, show what the information looks like in a spreadsheet. a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above, and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph.
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: 8p 1.25 Portfolio X Y Z Market Risk-free Rp 12% Information ratio 11 8 10 4 S24499 op 29% 14 19 1.10 0.75 1.00 0 4 Assume that the tracking error of Portfolio X is 9.2 percent. What is the information ratio for Portfolio X? Note: Do not round intermediate calculations. Round your answer to 4 decimal places.
Using the data generated in the previous question (Question 1); a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph
The market portfolio (M) has the expected rate of return E(rM) = 0.12. Security A is traded in the market. We know that E(rA) = 0.17 and βA = 1.5. (1) What is the rate of return of the risk-free asset (rf)? (2) Security B is also traded in the market. βB = 0.8. Then what is “fair” expected rate of return of security B according to the CAPM? (3) Security C is a third security traded in the market. βC = 0.6, and from the market price, investors calculate E(rC) = 0.1. Is C overpriced or underpriced? What is αC?