Ray purchased a stock that has a beta of 0.8, a standard deviation of 10%, and returned 13% this ye The market's return was 8% with a standard deviation of 11%. If the risk-free rate is 3%, what is the alpha of Trey's stock? 0.06 -0.4. 0.125.
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- ris owns a stock with an annualized return of 8.45 percent. If the risk-free rate is 2.25 percent, market returns are 9.00 percent, the standard deviation of the stock returns is 13.30 percent, the standard deviation of market returns is 11.40 percent, and the stock’s beta is 1.2, what is Iris’s Modigliani ratio for the investment? a. -2.75 percent b. -1.44 percent c. 1.72 percent d. 4.41 percenThe standard deviation of annual returns for Stock #1 is 53% and for Stock #2 is 47%. The correlation of Stock #1's returns to Stock #2's returns is +1. If you buy $47 worth of Stock #1, how much worth of Stock #2 must you trade in order to created a hedged portfolio of the two stocks? If you want buy Stock #2, make it a positive number and if you want to short-sell Stock #2, type a negative number. Round to the nearest dollar (but, as always, don't type the dollar sign).You invest 47% of your money in Stock A and the rest in Stock B. The standard deviation of annual returns is 72% for Stock A and 72% for Stock B. The correlation between the two stocks is 0.3. By how many percentage points does diversifying between these two stocks reduce your risk? Correct answer 0.139
- An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?You are analyzing a stock that has a beta of 1.19. The risk-free rate is 4.4% and you estimate the market risk premium to be 6.6%. If you expect the stock to have a return of 9.8% over the next year, should you buy it? Why or why not? The expected return according to the CAPM is%. (Round to two decimal places.) Should you buy the stock? (Select the best choice below.) O A. Yes, because the expected return based on the beta is equal to or less than the return on the stock. O B. No, because the expected return based on the beta is greater than the return on the stock.Ebenezer Scrooge has invested 65% of his money in share A and the remainder in share B. He assesses their prospects as follows: A B Expected return (%) 16 21 Standard deviation (%) 23 27 Correlation between returns 0.5 What are the expected return and standard deviation of returns on his portfolio? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. How would your answer change if the correlation coefficient were 0 or −0.50? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Is Mr. Scrooge’s portfolio better or worse than one invested entirely in share A, or is it not possible to say?
- The two stocks in your portfolio, X and Y, have independent returns, so the correlation between them, rXY is zero. Your portfolio consists of $50,000 invested in Stock X and $50,000 invested in Stock Y. Both stocks have an expected return of 15%, betas of 1.6, and standard deviations of 30%. Describe your two stocks portfolio by calculating its return and beta. Show your calculationsDaniel have established an investment portfolio of two stocks A and B five years ago. Required: Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock using Capital Asset Pricing Model (CAPM)? Assume that Daniel bought 3,000 stock B in the portfolio for total investment of $12,000, now the market price of the stock is $15, the dividend paid for this stock is $2 each year. Calculate the total rate of return of this stock? Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 35% and stock B accounts for 65% of your portfolio? A B Expected return 19.5% 12.5% Standard Deviation of return 7% 2.5% Correlation of coefficient (p) 0.45The expected rate of return for the stock of Cornhusker Enterprises is 15 percent, with a standard deviation of 5 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 2 percen a. Which stock would you consider to be riskier? Round your answers to two decimal places. The coefficient of variation of returns for Cornhusker's stock: The coefficient of variation of returns for Mustang's stock: ✓is riskier. -Select- b. If you knew that the beta coefficient of Cornhusker stock is 0.9 and the beta of Mustang is 0.6, how would your answer to Part a change? Looking only at systematic risk -Select- ✓is riskier.
- The expected rate of return for the stock of Cornhusker Enterprises is 20 percent, with a standard deviation of 15 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 9 percent. a. Which stock would you consider to be riskier? Why? b. If you knew that the beta coefficient of Cornhusker stock is 1.5 and the beta of Mustang is 0.9, how would your answer to Part a change?Ebenezer Scrooge has invested 55% of his money in share A and the remainder in share B. He assesses their prospects as follows: A B Expected return (%) 15 19 Standard deviation (%) 22 24 Correlation between returns 0.4 a. What are the expected return and standard deviation of returns on his portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. How would your answer change if the correlation coefficient were 0 or –0.40? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) c. Is Mr. Scrooge’s portfolio better or worse than one invested entirely in share A, or is it not possible to say? multiple choice Better Worse Not possible to sayYour client is considering purchasing stocks. The actual return of one o his choices follows here. Assist him by calculating the standard deviation and advise him what the risk is. Stock 'A' Actual Returns = 6%, 12%, 8%, 10% 0.0164 0.0258 0.0542 0.1072
