The table below contains the covariance matrix of stock returns and the market. Assume that the assumptions of CAPM hold. Market BlueChip YellowChip BlackChip WhiteChip Market 0.0413 0.081 0.049 0.0742 0.047 0.0742 0.0614 0.156 0.0996 0.0919 0.1031 BlueChip 0.081 0.2467 YellowChip 0.049 0.0742 BlackChip 0.0742 0.156 WhiteChip 0.047 0.0614 0.1441 0.0882 0.0919 0.1031 0.0882 0.1086 1. Find the market risk. ● 2. Find the systematic risk of BlueChip. 4

The table below contains the covariance matrix of stock returns and the market. Assume that the assumptions of CAPM hold. Market BlueChip YellowChip BlackChip WhiteChip Market 0.0413 0.081 0.049 0.0742 0.047 0.0742 0.0614 0.156 0.0996 0.0919 0.1031 BlueChip 0.081 0.2467 YellowChip 0.049 0.0742 BlackChip 0.0742 0.156 WhiteChip 0.047 0.0614 0.1441 0.0882 0.0919 0.1031 0.0882 0.1086 1. Find the market risk. ● 2. Find the systematic risk of BlueChip. 4

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 9MC: What is a characteristic line? How is this line used to estimate a stocks beta coefficient? Write...

See similar textbooks

Similar questions

A price-weighted index such as the DJIA is a geometric mean of current stock prices. a. True b. False
Stocks A and B have the following data. Assuming the stock marketyls efficient and the stocks are in equilibrium, which of the following statements is CORRECT? \table[[,A,B
Please assist with the below: Covariance with MPCorrelation with Market IndexBetaCAPM Req. ReturnValuation(Overvalued/Undervalued/Fairly Valued)Nature of stock(Aggressive/Defensive)
The metric that is used to show the extent to which a given stock’s return move up and down with the stock market? a. Correlation b. Beta c. Standard deviation d. Expected return
Astromet is financed entirely by common stock and has a beta of 1.20. The firm pays no taxes. The stock has a price-earnings multiple of 11.0 and is priced to offer a 10.9% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.6%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e, stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price? Complete this question by entering your answers in the tabs below. Reg A to E Reg F to G2…
Fundamental analysis is a method of______________________________to determine intrinsic value of the stock.a. Measuring the intrinsic value of a security using the market indexb. Using qualitative and quantitative factorsc. Using statistical analysis such as standard deviation, coefficients and probabilitiesd. Using historical price movementse. B and C only
Consider the below graph: E(R₁) E(RM) R₁ stocks M O stocks O What is the slope of the graph? If the historical return of an individual stock is lying the slope then the stock is undervalued or overvalued?
Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.
1) what is the expected return rate for stock A 2) what is the expected return rate for stock B 3) what is the standard deviation of returns for stock A 4) what is the standard deviation of returns for stock B.
3. The following information is given with respect to stock A: Scenario Probability Market return 1 0.1 -0.18 2 0.3 0.07 3 0.4 0.16 4 0.2 0.21 Knowing that the Rfis 0.07 compute alpha and the information ratio. Portfolio P return -0.32 0.00 0.22 0.40
Firm A's stock returns are correlated with market returns at 0.90, while Firm B's stock returns are correlated with market returns at 0.50. Therefore, it must be that the βA>βB. A) True B) False
what is the return of stock a what is the return of stockb what is the standard deviation on stock a?