Compute the expected rate of return for Intel common stock, which has a 1.2 beta. The risk-free rate is 3.5 percent and the market portfolio has an expected return of 16 percent.
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- Compute the expected
rate of return for Intel common stock, which has a 1.2 beta. The risk-free rate is 3.5 percent and the market portfolio has an expected return of 16 percent. - Referring to above answer, why is the rate you computed the expected rate?
-
Logan Morgan is considering an investment in one of two portfolios. Given the information that follows, which investment is better, based on risk (as measured by standard deviation) and the expected rate of return?
Portfolio A
Portfolio B
Probability
Return
Probability
Return
.20
-2%
.10
5%
.50
19%
.30
7%
.30
25%
.40
12%
.20
14%
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- Suppose the expected return for the market portfolio and risk-free rate are 13 percent and 3 percent respectively. Stocks A, B, and C have Treynor measures of 0.24, 0.16, and 0.11, respectively. Based on this information, an investor should ______?(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Probability 0.20 0.60 0.20 Probability 0.15 0.35 0.35 0.15 (Click on the icon in order to copy its contents into a spreadsheet.) ew an example Get more help. T 3 a. Given the information in the table, the expected rate of retum for stock A is 15.6 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.) E D 80 73 Return. 12% 16% 18% U с $ 4 R F 288 F4 V Common Stock B % 5 T FS G 6 Return -7% 7% 13% 21% B MacBook Air 2 F& Y H & 7 N 44 F? U J ** 8 M | MOSISO ( 9 K DD O . Clear all : ; y 4 FIX { option [ + = ? 1 Check answer . FV2 } ◄ 1 delete 1 return shiftIf a given stock in the portfolio had established 1.23 beta; the related expected return is at 11.7percent, and 3.5percent is the current earning of a risk-free asset; a. Determine the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of 0.7, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9%, what is its beta? d. If a portfolio of the two assets has a beta of 2.46, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Discuss.
- (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks Given the information that filloors, which investment is better based on the risk (as measured by the standard deviation) and retum? Common Stock A Probability 0,20 0.60 0:20 Return 10% 17% 20% Common Stock B Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet) Return -6% 5% 16% 23% a. Given the information in the table, the expected rate of retum for stock Ais (Round to two decimal places)Consider a portfolio consisting of the following three stocks: E The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. b. Using your answer from part (a), calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b). a. Compute the beta and expected return of each stock. (Round to two decimal places.) TITLT Data table Portfolio Weight (A) Volatility (B) Correlation (C) Expected Return (E) % Beta (D) НЕС Согр 0.28 13% 0.33 Green Widget (Click on the following icon a in order to copy its contents into a spreadsheet.) 0.39 27% 0.61 % Portfolio Weight Alive And Well 0.33 14% 0.43 Volatility 13% Correlation with the Market Portfolio НЕС Согр Green Widget 0.28 0.33 b. Using your answer from part (a), calculate the expected…Suppose that there exist two securities (A and B) with annual expected returns equal to ra = 3% and rg = 5% and standard deviations equal to o4 = 7% and oB = 10% respectively. The correlation coefficient between the returns of these securities is p = -0.5. What is the expected return and the standard deviation of an equally weighted portfolio consisting of the securities A and B? Describe every step of your calculations in detail. What is the expected return and the standard deviation of a portfolio consisting of the securities A and B, if the relevant weights are chosen to minimize the risk of the portfolio? Present the minimisation problem and describe every step of your calculations in detail. How could an investor maximize diversification benefits? Critically discuss and explain in detail.
- QUESTIONS: 1) Assuming that the risk-free rate of return is currently 3,2%, the market risk premium is 6% whereas the beta of HelloFresh SH. stock is 1.8, compute the required rate of return using CAPM. 2) Compute the value of each investment based on your required rate of return and interpret the results comparing with the market values. 3) Which investment would you select? Explain why using appropriate financial jargon (language). 4) Assume HelloFresh SH's CFO Mr. Christian Gaertner expects an earnings upturn resulting increase in growth (rate) of 1%. How does this affect your answers to Question 2 and 3? 5) AACSB Critical Thinking Questions: A) Companies pay rating agencies such as Moody's and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the first place; doing so is strictly voluntary. Why do you think they do it? (Textbook page: 198) B) What are the difficulties in using the PE ratio to value stock?…Assume that using the Security Market Line(SML) the required rate of return(RA)on stock A is found to be halfof the required return (RB) on stock B. The risk-free rate (Rf) is one-fourthof the required return on A. Return on market portfolio is denoted by RM. Find the ratioof betaof A(A) tobeta of B(B). Thank you for your help.The following portfolios are being considered for investment. During the period under consideration, RFR = 0.08. Portfolio Return Beta σi P 0.14 1.00 0.05 Q 0.20 1.30 0.11 R 0.10 0.60 0.03 S 0.17 1.20 0.06 Market 0.12 1.00 0.04 Compute the Sharpe measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Sharpe measure P Q R S Market Compute the Treynor measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Treynor measure P Q R S Market
- The following portfolios are being considered for investment. During the period under consideration, RFR = 0.07. Portfolio Return Beta P 0.15 1.00 0.05 Q 0.09 0.50 0.03 R. 0.21 1.30 0.10 0.18 1.20 0.06 Market 0.12 1.00 0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Sharpe measure P Q R Market b. Compute the Treynor measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Treynor measure P Q R Market c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings. Portfolio Rank (Sharpe measure) Rank (Treynor measure) P |-Select- v |-Select- v Q -Select- v -Select- V R. -Select- V -Select- v -Select- v -Select- v Market -Select- v -Select- v -Select- v is poorly diversified since it has a high ranking based on the -Select- but a much lower ranking with the -Select-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 portfolios are being considered for investment. During the period under consideration, RFR = 0.07.Portfolio Return Beta σiA 0.15 1.0 0.05B 0.20 1.5 0.10C 0.10 0.6 0.03D 0.17 1.1 0.06Market 0.13 1.0 0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. b. Compute the Treynor measure for each portfolio and the market portfolio. c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings.
