Problem 11 Intro Assume that the CAPM holds. One stock has an expected return of 9% and beta of 0.5. Another stock has an expected return of 13% and a beta of 1.5. Part 1 What is the expected return on the market?
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- QUESTION 2 Copy of In each small interval of time the stock price is assumed to move up by a proportional amount or to move down by a proportional amount d Consider the following binomial tree Suppose So-70.70, o =40%, At =0.0833 89.07 A. 70.70 70.70 B 56.12 Find the value of B?Question 11 Using the single index model, what is the alpha of a stock with beta of 1.2, a market return of 14%, risk free rate of 3% and the actual return of the stock is 1896? 1.80% O2.11% O-3.12% O 0.75% -1.37% WQuestion 8 What is the value of a call given the Black-Scholes model and the following information? Stock price - $44, Exercise price $40, Time to expiration=.75, Risk-free rate-4.5%, Standard deviation = 25%, N(d1) 759395, and N(d2) - 687172. O $8.81 O $4.86 O $6.84 O $2.03 O $9.27
- Question 2 Consider a market consisting of three stocks with the following information: Si Stock S2 S3 Price $100 $200 $500 Return 1.04 1.08 1.10 Standard 0.1 0.2 0.3 deviation For any two stocks i and j, o, = cov(x,,x,)=0,0,P,- Here, Piz =0.1,Piz =-0.8, P3 =0.2. What are the mean return and variance of this portfolio?3. Problem 8.05 (Beta and Required Rate of Return) еВook A stock has a required return of 13%, the risk-free rate is 4.5%, and the market risk premium is 4%. a. What is the stock's beta? Round your answer to two decimal places. b. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. I. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. III. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. IV. If the stock's beta is equal to 1.0, then the change in required rate of return will…Question 4 The risk-free rate of return is 2.7 percent, the inflation rate is 3.1 percent, and the market risk premium is 6.9 percent.What is the expected rate of return on a stock with a beta of 1.08?Select one:A. 12.22 percentB. 11.47 percentC. 10.15 percentD. 10.92 percent
- Question 29 Assume the following data for a stock: risk-free rate 5 percent: beta (market) = 1.4; beta (size) - 0.4; beta (book-to- market)-1.1; market risk premium - 13 percent; size risk premium 9.7 percent; and book-to-market risk premium = 11.2 percent. Calculate the expected return on the stock using the Fama-French three-factor model. O 26.5 percent 14.8 percent O 25.1 percent 12.0 percent10. Problem 8.05 (Beta and Required Rate of Return) Office eBook A stock has a required return of 16%, the risk-free rate is 3%, and the market risk premium is 6%. a. What is the stock's beta? Round your answer to two decimal places. b. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. I. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. III. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. IV. If the stock's beta is equal to 1.0, then the change in required rate of…Beta 0.53 Risk-free Rate 0.7% MRP 5.55% Given the data in the table, what is the stock's risk premium? Answer as a percent and use 2 decimal places.
- QUESTION 1 Exhibit 5.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Stock Rit Rmt ai Beta A 10.6 15 0 0.8 Z 9.8 8.0 0 1.1 Rit = return for stock i during period t Rmt = return for the aggregate market during period t Refer to Exhibit 5.5. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk)? a. 4.40 b. −1.70 c. 3.40 d. −4.40 e. −1.86Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(rA.s) E(rB,s) -0.1 0.04 0.08 0.05 0.13 0.07 Recession 0.2 Normal 0.5 Expansion 0.3 Part 1 What is the expected return for stock A? 3+ decimals Submit3 pts Assume that you run a regression on the raw returns of the stock of Company J against the raw returns of the market and find an intercept of 1.324 percent and a beta of 1.50. If the risk-free rate is 2.64 percent, and using the concept of Jensen's Alpha, then determine by how much this stock beat the market. Answer in decimal format, to 4 decimal places. For example, if you answer is 3.33%, enter "0.0333".