The following shows beta for several companies. Calculate each stock’s expected rate of return using CAPM, assuming the risk free rate is 4% and the risk premium for the market portfolio is 7%. What is your portfolio beta if you construct an equally weighted portfolio using all stocks? What can you say about this portfolio relative to the market? Stock Beta Apple 1.35 Johnson & Johnson 0.69 IBM 1.10

The following shows beta for several companies. Calculate each stock’s expected rate of return using CAPM, assuming the risk free rate is 4% and the risk premium for the market portfolio is 7%. What is your portfolio beta if you construct an equally weighted portfolio using all stocks? What can you say about this portfolio relative to the market? Stock Beta Apple 1.35 Johnson & Johnson 0.69 IBM 1.10

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 4P: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market...

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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?
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An analyst has modeled the stock of a company using the Fama - French three - factor model. The market return is 8 %, the return on the SMB portfolio ( rSMB) is 2.8%, and the return on the HML portfolio (rHML) is 5.6 %. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's predicted return? Do not round intermediate calculations. Round your answer to two decimal places. %