Suppose that the borrowing rate that your client faces is 7%. Assume that the equity market index has an expected return of 11% and standard deviation of 35%, that rf=2% What is the range of risk aversion for which a client will neither borrow nor lend, that is, for which y=1? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. y= 1 for ≤A≤ 0.73

Suppose that the borrowing rate that your client faces is 9%. Assume that the equity market index has an expected return of 13% and standard deviation of 25%, that rf = 5%. What is the range of risk aversion for which a client will neither borrow nor lend, that is, for which y = 1?

Suppose the nominal rate of return is 0.085 and the risk-free rate is 0.010. What is the risk premium? Instruction: Round to two decimal places. E.g., if your answer is 0.0106465 or 1.06465%, you should type ONLY the number .01, neither 0.0106465, 0.0106, nor 1.065. Otherwise, Blackboard will treat it as a wrong answer.

The following numbers were randomly generated from a standard normal distribution:0.5 − 0.75 1.1i). Given interest rate r = 0.01 and volatility parameter σ = 0.2, compute the drift parameter µ of asecurity following a risk-neutral geometric Brownian motion.ii). Suppose security ABC follows a geometric Brownian motion with the parameters given above. Ifthe initial closing price of ABC is S0 = s = 10, compute 3 more simulated daily closing prices forABC using the random numbers above.

Suppose the CAPM holds. You know that the average investor has a degree risk aversion of 3.3. The current risk free rate is 0.012, the inflation is estimated 0.017, and the volatility of the market is 0.17. What is the market risk premium?   [*.000]

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.)

Assume that security returns are generated by the single-index model, Ri a BiRM + ei where R₁ is the excess return for security /and Ry is the market's excess return. The risk-free rate is 3%. Suppose also that there are three securities A, B, and C, characterized by the following data: Security Bi E(Ri} #{@į) A 1.5 61 298 B 1.7 8 15 C 1.9 10 24 a. If oy 26%, calculate the variance of returns of securities A, B, and C. Answer is complete but not entirely correct. Variance Security A 1,521 Security B 1,609 Security C 2,440 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.)

Use the following information on states of the economy and stock returns to calculate the expected return for Dingaling Telephone: (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Probability of State of Security Return if State Occurs State of Economy Recession Economy 0.30 Normal Вoom -6.5% 9.0 16.6 0.55 0.15

Assume that security returns are generated by the single-index model,  Ri = alphai + BetaiRM + ei where 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 Betai E(Ri) sigma(ei) A 1.4 15% 28% B 1.6 17% 14% C 1.8 19% 23% a. If simaM = 24%, calculate the variance of returns of securities A, B, and C (round to whole number).    Variance Security A   Security B   Security 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 whole number decimal and the mean as a whole number percentage)?   Mean Variance Security A ?%   Security B ?%   Security C ?%

Suppose that the Treasury bill rate is 6% rather than 3%, as we assumed in Table 12.1, and the expected return on the market is 9%. Use the betas in that table to answer the following questions. a. When you assume this higher risk-free interest rate, what makes sense for how you should modify your assumption about the rate of return on the market portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) b. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. Suppose now that you continued to assume that the expected return on the market remained at 9%. Now what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)d. Ford offer a higher or lower expected return if the interest rate is 6% rather than 3%? e. Walmart offer a higher or…