As you are a security analyst preparing a report for the firm’s expectation regarding two stocks for the year to come. Your report is to include the expected returns for these stocks and a graph illustrating the expected risk-return trade-off. You have been informed that the firm expects the S&P 500 to earn a return of 11% in the year ahead and that the risk-free rate is 5%. According to Morningstar, the betas for stocks X and Y are 0.5 and 1.5 respectively. Required 1- Find the expected returns for X and Y using CAPM Moodle.

Consider stocks of Firms A and B. Their expected returns are 12% and 11%, respectively, and the volatilities of their returns are 8% and 10%, respectively. Firm A has a market beta of 1.5 and Firm B has a market beta of 1.0, and the correlation between the two stocks is 0.5. Your risk-averse client wants to invest $5 million with an expected return of 15%. You can put together a portfolio with the market index, Firm A, Firm B, and a risk-free asset. Which of these four securities would you include in the portfolio and how much would you invest in each security?

Investors expect the market rate of return this year to be 17.00%. The expected rate of return on a stock with a beta of 0.9 is currently 15.30%. If the market return this year turns out to be 15.00%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Stock Z has a beta of 2 and an expected return of 10%. If Treasury Bills currently return 1% and the expected return on the S&P 500 is 7%, is this stock correctly priced, underpriced, or overpriced? Graph the security market line and Stock Z. Label all relevant details. What does beta represent? Explain the concept of market efficiency using your graph

Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Expected Return 10.5% Delta Vanlines 1.25 13.0 % 1.60 16.0% Firm Beta Anderson, Inc. 0.90 Nathan's Bakeries Z-man Electronics O Delta Vanlines 1.90 19.0% All of the stocks, Anderson, Inc. O Nathan's Bakeries OZ-man Electronics

Calculate the Beta of a stock that has annual returns of 18%, -10%, 16%, while the market (X-variable) has corresponding annual returns of 20%, -5%, 10% during each of these three years. (Hint: Your calculator should generate an average value of 8% for the stock = Y, if not re-check your data register).

A stock analyst at PJ Brokers estimates that the beta of stock ZLX is close to two (2.0).  Therefore, ZLX will have an expected return that is: A) about equal to the risk-free rate B) about equal to the market expected return C) expected to exceed the market expected return

You are considering an investment in the common stock of Remi's Sporting Goods.  The stock is expected to pay a dividend of $1.80 a share at the end of the year (D1=1.80). The stock has a beta of 0.8. The risk-free rate is 4.5%, and the market expected return is 8.0%. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $24 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years?

An investment firm uses the Carhart-Fama-French Model to track the performance of the portfolio managers in the firm.  In 2019, the risk-free rate of return was 2.2% and the return on the S&P 500 (a proxy for the total market) was 28.9%.  An actively managed large cap portfolio earned 32.8%, while the benchmark portfolio it was compared to earned 31.2%.  The betas for the benchmark portfolio and the actively managed portfolio are:   Betas   Risk Factor benchmark portfolio managed portfolio factor return Market risk (RMRF) 1.00 1.05 ? Small cap stocks (SMB) -0.50 -0.70 -5.90% Value stocks (HML) 0.20 0.40 -6.35% Momentum stocks (WML) 0.10 0.20 6.44% What is the active return on the managed portfolio? What is the factor return for market risk (RMRF)? What proportion of the active return is due to the market risk tilt? What proportion of the active return is due to the large cap stocks tilt (the tilt away from small cap…

YNA is expected to pay a dividend of $1.0 in Year 1 and $1.2 in Year 2. Analysts expect the price of YNA shares to be $19 two years from now. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. The beta of the stock is 1.2.  Compute the intrinsic value of the stock. Round your answer to two decimal places and enter without the dollar sign.