Stock Y has a beta of 0.9 and an expected return of 9.46 percent. Stock Z has a beta of 2.1 and an expected return of 15.59 percent. What would the risk-free rate (in percent) have to be for the two stocks to be correctly priced relative to each other?
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Stock Y has a beta of 0.9 and an expected return of 9.46 percent. Stock Z has a beta of 2.1 and an expected return of 15.59 percent. What would the risk-free rate (in percent) have to be for the two stocks to be correctly priced relative to each other? Answer to two decimals.
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- Stock Y has a beta of 1.40 and an expected return of 15.2 percent. Stock Z has a beta of .85 and an expected return of 11.3 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Risk-free rate %2) Stock Y has a beta of 1.28 and an expected return of 13.7 percent. Stock Z has a beta of 1.02 and an expected return of 11.4 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. What would the risk-free rate have to be for the two stocks to be correctly priced? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate %
- Suppose that three stocks (A, B, and C} and two common risk factors (1 and 2) have the following relationship: E(RA) = (1.1)A1 + (0.8)A2 E(RB) = (0.7)A1 + (0.6)A2 E(RC) = (0.3)A1 + (0.4)A2 a. If A1 = 4 percent and A2 = 2 percent, what are the prices expected next year for each of the stocks? Assume that all three stocks currently sell for $30 and will not pay a dividend in the next year. b. Suppose that you know that next year the prices for Stocks A, B, and C will actually be $31.50, $35.00, and $30.50. Create and demonstrate a riskless, arbitrage investment to take advantage of these mispriced securities. What is the profit from your investment? You may assume that you can use the proceeds from any necessary short sale. Problems 13 and 14 refer to the data contained in Exhibit 7.23, which lists 30 monthly excess returns to two different actively managed stock portfolios (A and B) and three different common risk factors (1, 2, and 3). {Note: You may find it…Given the returns and probabilities for the three possible states listed below, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 8.10 percent and 11.60 percent, respectively. (Round answer to 4 decimal places, e.g. 0.0768.) Good OK Poor Covariance Probability 0.22 0.60 0.18 Return on Stock A 0.30 0.10 -0.25 Return on Stock B 0.50 0.10 -0.30Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.
- A certain stock has a beta of 1.3. If the risk-free rate of return is 3.9 percent and the market risk premium is 7.4 percent, what is the expected return of the stock? What is the expected return of a stock with a beta of 1.21? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)The stock market can have three potential returns with the following probabilities. Note "otherwise" is whatever probability it takes for all three probabilities to sum to one. So, if the first two probabilities are each .30, then "otherwise" represents a probability of .40. Probability Return -0.04 0.24 0.38 otherwise 0.00 0.18 What is the stock market's standard deviation? Enter your answer in decimal form, and show 4 decimal places.A stock has an expected return of 0.15, its beta is 0.75, and the risk-free rate is 0.05. What must the expected return on the market be? Enter the answer with 4 decimals (e.g. 0.0567).
- The market and Stock J have the following probability distributions: Probability rM rJ 0.3 14 % 18 % 0.4 10 4 0.3 18 13 Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place. Expected rate of return (Market): % Expected rate of return (Stock J): % Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places. Standard deviation (Market): % Standard deviation (Stock J): %Assume the expected return on the market is 7 percent and the risk-free rate is 4 percent. a. What is the expected return for a stock with a beta equal to 1.10? (Enter your answers in decimals. Do not enter percent values.) b. What is the market risk premium? (Enter your answers in decimals. Do not enter percent values.)Suppose the beta estimated from the CAPM for stock A is 2.3 and stock B is 1.1. What is the beta of an equally weighted stock portoflio of A and B stock?