Consider the following information: Security C Security K Standard Deviation Beta 20% 30% 1.25 0.95 Which security will have a higher expected return? Oa C Ob. K D Oc Both securities will have the same expected return
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- Consider the following information (Assume that Security M and Security N are in the same financial market): Standard Deviation BetaSecurity M 20% 1.25Security N 30% 0.80 Which security has more total risk? Group of answer choices Security M Security N EqualConsider the following information (Assume that Security M and Security N are in the same financial market and the market is efficient): Standard Deviation BetaSecurity M 20% 1.25Security N 30% 0.80 Which security has more systematic risk? Group of answer choices Security M Security N EqualConsider the following two securities X and Y. Security Return Standard Deviation X 20.0% Y 10.0% 20.0% 30.0% Risk-free asset 5.0% Beta 1.50 1.0 Which asset (X or Y) in Table 8.3 has the least total risk? Which has the least syst O Y; X. O X; Y. O Y; Y. ○ X; X.
- Consider the following information (Assume that Security M and Security N are in the same financial market): Standard Deviation BetaSecurity M 20% 1.25Security N 30% 0.80 Which security should have higher expected return? Group of answer choices Security M Security N EqualSuppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.70 0.180 Repete Col 1.39 0.153 What is the risk-free rate? (Do not round intermediate calculations. Round the final answer to 3 decimal places) Risk-free rate % Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Expected Return on Market Pete Corp. Repete Co.%Suppose you observe the following situation: Security Beta Expected Return Peat Company 1.70 13.60 Re - Peat Company 0.85 10.80 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk - free rate?
- Assume that a security is fairly priced and has an expected rate of return of 0.13. The market expected rate of return is 0.13, and the risk-free rate is 0.04. The beta of the stock is A. 1.7. B. 0.95. C. 1. D. 1.25.Which of the two securities are the best? By using probability estimates, below is the computation of ff. statistics: Statistic Security A Security B Expected return Standard deviation 12% 20% 8% 10% Requirement Calculate the coefficient of variation for each security Explain why the standard deviation and coefficient of variation give different ranking of risk. Which method is superior and why?The following expected return and the standard deviation of current returns are known: Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8 T-Bills 0.05 0 0 Market Portfolio 0.20 0.15 1 Required: Determine which of A or B is over-valued or undervalued.
- Assume that security returns are generated by the single-index model,Ri = αi + βiRM + eiwhere Ri is the excess return for security i and RM is the market’s excess return. The risk-free rate is 2%. Suppose also that there are three securities A, B, and C, characterized by the following data: Security βi E(Ri) σ(ei) A 0.7 7 % 20 % B 0.9 9 6 C 1.1 11 15 a. If σM = 16%, calculate the variance of returns of securities A, B, and C. b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number.)Consider the following data for two risk factors (1 and 2) and two securities (J and L):λ0 = 0.07 λ1 = 0.04 λ2 = 0.06bJ1 = 0.10 bJ2 = 1.60 bL1 = 1.80 bL2 = 2.45a. Compute the expected returns for both securities. b. Suppose that Security J is currently priced at $50 while the price of Security L is $15.00.Further, it is expected that both securities will pay a dividend of $0.95 during the coming year.What is the expected price of each security one year from now? c. Compute the correlation between stock A and stock B considering the following data.Standard deviation of stock A = 10 percentStandard deviation of stock B = 17 percentCovariance between the two stocks = 90.multiple choice, Security X has an expected rate of return E(R) of 0.11 and a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.08. According to the Capital Asset Pricing Model (CAPM), this security is underpriced. overpriced. fairly priced. cannot be determined from data provided.