Given the following for Stocki: PO Bi rf 47.50 2.20 0.0600 E(rM) 0.1250 Before the bad news is interpreted to a beta, the stock drops at the open from 47.5 to 46.15. What is the market's perceived new risk for the stock as measured by beta, assuming it could still rise to the P1 target calculated using the CAPM? O2.741 2.622 O2.443 O2.355 O2.881

Given the following for Stocki: PO Bi rf 47.50 2.20 0.0600 E(rM) 0.1250 Before the bad news is interpreted to a beta, the stock drops at the open from 47.5 to 46.15. What is the market's perceived new risk for the stock as measured by beta, assuming it could still rise to the P1 target calculated using the CAPM? O2.741 2.622 O2.443 O2.355 O2.881

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Considering these data where 'P1' estimates are analyst forecasts of future stock prices: Stock PO ABCD 48.5 25 57 27 33.95 39 40 47 Market Risk Premium 0.0525 T-bill rate 0.04 0.05544 Assuming the analyst forecast is correct, what is the abnormal return (alpha) relative to the CAPM E(r) for Stock: D? 0.05352 0.05100 P1 0.04626 0.04863 σ B 0.18 2.4 0.4 1.1 0.2 1.3 0.26 1.6 MAGANIAMBIE
Considering these data where 'P1' estimates are analyst forecasts of future stock prices: Stock PO 48.5 0.18 2.4 25 27 0.4 1.1 33.95 39 0.2 1.3 40 47 0.26 1.6 ABCD Market Risk Premium 0.0525 T-bill rate 0.04 P1 O B 57 Assuming the analyst forecast is correct, what is the abnormal return (alpha) relative to the CAPM E(r) for Stock: B? O-0.01780 O-0.01698 -0.01622 O-0.01524 O-0.01873
Compute the abnormal rates of return for the following stocks assuming the following systematic risk measures (betas): Rit = return for stock i during period t Rmt = return for the aggregate market during period t Bi = beta for stock i Use a minus sign to enter negative values, if any. Round your answers to one decimal place. ARBt: ARFt: ARTt: ARct: ARET: % % % % Stock B F T C E % Rit 10.1% 9.4 13.2 11.2 15.1 Rmt 3.9% 8.5 10.0 15.6 11.2 Bi 1.00 1.10 1.45 0.65 -0.40
Consider an event study of the following stock. Realised return Market return t = 0 (event day) 0.1 0.1 t =1 0.06 0.04 t = 2 0.03 0.02 t = 3 0.015 0.01 Suppose that the estimated market model is . What is the CAR (cumulative abnormal returns) for t = 3?
Compute the abnormal rates of return for the following stocks during period t (ignore differential systematic risk): Stock % % % % BFT % B F T UE Rit = return for stock i during period t Rmt = return for the aggregate market during period t Use a minus sign to enter negative values, if any. Round your answers to one decimal place. ARBE: ARF: ARTI: ARC: AREL: с Rit 11.5% 9.2 12.5 12.5 15.9 Rmt 4.7% 6.2 6.6 15.2 11.1
Abnormal returns, if a stock has a(Alpha)=.004, b(Beta)=1.2, A. Using the market model (eq. 7.4), find the expected percent return if the market increases by 2%. B. If the actual return is 2%, 3%, or 4%, calculate the abnormal return.
Given the following for Stocki: PO Bi rf 45.50 0.80 0.0300 E(TM) 0.1200 News suddenly comes out that increases the perceived risk of the stock to Bi= 1.3 You still expect the stock to be worth the price you calculated above, however, to what price should the stock drop reflecting the new expectation for risk? 43.71 41.14 39.17 37.62 33.22
Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Economy Stock B Recession .15 .06 - 10 Normal .56 .09 .19 Вoom .29 .14 .36 . Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) . Calculate the standard deviation for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock A expected return % Stock B expected return % Stock A standard deviation % Stock B standard deviation %
Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending Price HPR (includingdividends) Boom 0.30 $ 140 53.5 % Normal growth 0.28 110 17.5 Recession 0.42 80 −12.0 Use the equations E(r)=Σsp(s)r(s)E(r)=Σsp(s)r(s) and σ2=Σsp(s) [r(s)−E(r)]2σ2=Σsp(s) [r(s)−E(r)]2 to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
37. An analyst developed the following probability distribution of the rate of return for a common stock: Rate of return Scenario Recession -0.05 0.10 0.25 What's the standard deviation of the rate of return? Show your calculations. n k=ZkP |o= i=1 A. 0.0549. B. 0.0649. Normal Boom . 0.0749. D. 0.0849 E. 0.0949. 건 Probability 0.20 0.60 0.20 i-1 (k₂ − Ê)² P₂.
A stock has an expected return of 0.15, its beta is 0.52, and the expected return on the market is 0.08. What must the risk-free rate be? (Hint: Use CAPM) Enter the answer in 4 decimals e.g. 0.0123.
Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession. Probability Ending Price 0.30 $ 140 0.22 110 0.48 80 Mean Standard deviation. Use the equations E (r) = Ep (s) r(s) and o² = Ep (s) [r(s) - E(r)]² to compute the mean and standard deviation of the HPR on stocks. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. HPR (including dividends) 55.5% 15.5 -14.0 % %

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