Q: The risk-free rate is 3.4 percent and the market expected return is 11.9 percent. What is the…
A: The expected return of a stock can be found out using the CAPM formula. Given, Rf = Risk free…
Q: Suppose the risk-free return is 4% and the market portfolio has an expected return of 10% and a…
A: Calculation of 3M's beta with respect to market: Beta of 3M is determined by multiplying the…
Q: what is the Sharpe ratio of this portfolio?
A: Information Provided: Return = 25.30% Standard deviation = 31% T-bills = 5%
Q: You currently have $100 of 8%. Suppose the risk-free rate is 5%, and there is another portfolio that…
A: capital amount = $ 100,000. r(rp) = rf + x (rm-rf) = 5+x ( 20-5) ratio of standard deviation is…
Q: A stock has a beta of 1.19 and an expected return of 11.27 percent. If the risk-free rate is 3.4…
A: Given: Beta = 1.19 Expected return = 11.27% Risk free rate = 3.4%
Q: Suppose the risk-free return is 4.1% and the market portfolio has an expected return of 9.3% and a…
A: In CAPM; Capital Asset Pricing Model, the expected return for a single stock is ascertained by…
Q: The current risk-free rate of return, rRF, is 2 percent and the market risk premium, RPM, is 8…
A: Risk free rate = 2% Marker risk premium = 8% Beta = 1.40
Q: Please help me with 11-6 ??♀️
A: Introduction : Risk free rate =4% Market risk premium = 5% Beta coefficient =2.0 Using CAPM…
Q: Suppose the risk-free return is 4.0% and the market portfolio has an expected return of 10.0% and a…
A: Expected return can be calculated by using CAPM equation given below Expected return =Risk free…
Q: Suppose the risk-free return is 4.2% and the market portfolio has an expected return of 11.4% and a…
A: Expected return = Risk free rate + beta * (market return -risk free rate )
Q: A stock has an expected return of 13.1 percent, its beta is 1.70 and the risk free premium rate is…
A: Risk market return is used in CAPM model to calculate expected return on the stock and it is also…
Q: A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7…
A: A portfolio is a combination or group of financial instruments and securities that are held by an…
Q: If a given stock in the portfolio had established 1.23 beta; the related expected return is at…
A: Part A: The expected return on the portfolio as follows: = Weight of stock ×Expected return on Stock…
Q: The average return on the Market is 12% while the market risk premium is 7%. What is the require…
A: Market return = 12% Market premium = 7% Risk free rate = 12%-7% = 5%
Q: A portfolio has a beta of 1.2 and an actual return of 14.1 percent. The risk-free rate is 3.5…
A: Given: Beta = 1.2 Actual return = 14.1% Risk free rate = 3.5% Market risk premium = 7.4%
Q: Suppose that the risk-free rate ry = 0.03, the expected market return µM = 0.11, and the market…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: A stock has a beta of 1.2 and an expected return of 11.8 percent. A risk-free asset currently earns…
A: Portfolio refers to basket of different financial assets in which investment is made by single…
Q: A stock has an expected return of 13.1 percent, a beta of 1.28, and the expected return on the…
A: Given details are : Expected return on stock = 13.1% Beta = 1.28 Expected market return (Rm) = 11%…
Q: Calculate covariance and coefficient of correlation between the returns of the stocks A and B.
A: Covariance is calculated by analyzing at-return surprises (standard deviations from the expected…
Q: What is the portfolio’s expected return?
A: A portfolio is the combination of different stocks, bonds and shares. The combination renders…
Q: When the return on the market portfolio goes up by 5%, the return on Stock A goes up on average by…
A: Return is the basic factor which affects the investor’s decision. CAPM is the tool which is used to…
Q: Assume that the risk-free rate is 6 percent and the expected return on the market is 13 percent.…
A: Given details are : Risk free rate (Rf) = 6% Expected return on market (Rm) = 13% Beta of stock =…
Q: A stock has an expected return of 14.1 percent, a beta of 1.8, and the return on the market is 9.8…
A: Expected return (Re) = 14.1% Beta (B) = 1.8 Market return (Rm) = 9.8% Risk free rate = Rf
Q: Equity has a beta of 1.35 and an expected return of 16 percent. A risk-free asset currently earns…
A: Beta = 1.35 Expected Return = 16% Return Risk-free asset = 4.8% Part a: Weight of asset = 50%…
Q: Adam wants to determine the required return on a stock portfolio with a beta coefficient of 0.5.…
A: Required rate of return = risk free rate + beta * (market return - risk free rate)
Q: A stock has an expected return of 13.2 percent, the risk-free rate is 3.5 percent, and the market…
A: According to capital asset pricing model: rs=rf+beta×rm-rfwhere,rs=expected returnrm-rf=market risk…
Q: Stock A has an expected return of 10 percent and a beta of 1.0. Stock B has a beta of 2.0. Portfolio…
A: CAPM stands for capital asset pricing model. It explains the relationship between systematic risk…
Q: Assume that the risk-free rate is 5 percent and the market risk premium is 6 percent. What is the…
A: This question has two parts: First we need to compute the Expected return of overall stock market…
Q: A stock has an expected return of 13.5 percent, its beta is 1.16, and the expected return on the…
A: Expected return = 13.5% Beta = 1.16 Market return = 12.50%
Q: A stock has an expected return of 9.9 percent, the risk-free rate is 1.8 percent, and the market…
A: Expected return = 9.9% Risk free rate = 1.8% Market risk premium = 4.3%
Q: A stock has an expected return of 13.6 percent, the risk-free rate is 3.7 percent, and the market…
A: In the above question we require to compute the expected beta of the stock. This question can be…
Q: Suppose the risk-free return is 4.5% and the market portfolio has an expected return of 10.3% and a…
A: According to the market scenario, the stock prices are keep on changing with the changing market…
Q: A stock has a beta of 1.38 and an expected return of 13.6 percent. If the risk-free rate is 4.7…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: The risk-free rate is 2%, the market risk premium is 8.00%, and portfolio A has a beta of 2. What is…
A: Given: Risk free rate = 2% Market risk premium = 8% Beta of portfolio = 2 Computation of required…
Q: ected return for a stock with a beta equal to 0.50? - What is the marke
A: Given information :
Q: A stock has an expected return of 11.25 percent, a beta of 0.82, and the expected return on the…
A: Capital asset pricing model is used to compute the expected return from a stock: Here, Expected…
Q: Your portfolio has a beta of 1.73, a standard deviation of 29 percent, and an expected return of…
A: Treynor ratio = Portfolio Return - Risk Free ReturnPortfolio Beta
Q: A stock has a beta of 0.7 and an expected return of 7.3 percent. If the risk-free rate is 1.3…
A: Beta = 0.7 Expected return = 7.3% Risk free rate = 1.3%
Q: A stock has an expected return of 12.7 percent and a beta of 1.18, and the expected return on the…
A: Given information: Expected return is 12.7% Beta value is 1.18 Expected return on market is 11.7%
Q: When the return on the market portfolio goes up by 5%, the return on Stock A goes up on average by…
A: A portfolio is defined as a group or a collection of various financial assets or commodities that…
Q: A stock has a beta of 1.2 and an expected return of 11.8 percent. A risk-free asset currently earns…
A: Portfolio weight refers to the holding of all assets or investments. Weight of risk-free asset in a…
Q: 1. Stock A has a required expected return of 6 percent and stock B has a required expected return of…
A: Required return of A (Ra) = 6% Required return of B (Rb) = 10% Beta of A = B Beta of B = twice that…
Q: Using CAPM A stock has beta of 1.04, the expected return on the market is 10 percent, and the…
A: The expected return is the minimum required rate of return which an investor required from the…
Step by step
Solved in 4 steps
- Assume that there is a portfolio with an E(r) =20% and σ = 30%. Also, the risk-free rate of return on T-Bills is 7%. If you are a risk-averse investor with degree of risk aversion A=4 would you invest in the risky portfolio or in the risk free asset? And what if your A=2? Assume that there is a portfolio with an E(r) =20% and σ = 30%. Also, the risk-free rate of return on T-Bills is 7%. If you are a risk-averse investor with degree of risk aversion A=4 would you invest in the risky portfolio or in the risk free asset? And what if your A=2?The risk free rate is 3%. The optimal risky portfolio has an expected return of 9% and standarddeviation of 20%. Answer the following questions.a) Assume the utility function of an investor is U = E(r) − 0.5Aσ2. What is condition ofA to make the investors prefer the optimal risky portfolio than the risk free asset? b) Assume the utility function of an investor is U = E(r) − 2.5σ2. What is the expectedreturn and standard deviation of the investor’s optimal complete portfolio?Consider the multifactor model APT with three factors. Portfolio A has a beta of 0.8 on factor 1, a beta of 1.1 on factor 2, and a beta of 1.25 on factor 3. The risk premiums on the factor 1, factor 2, and factor 3 are 3%, 5%, and 2%, respectively. The risk-free rate of return is 3%. The expected return on portfolio A is __________ if no arbitrage opportunities exist. A. 23.0% B. 16.5% C. 13.4% D. 13.5%
- Now assume that your portfolio only includes a risky asset, Asset C and a risk-free asset, Asset D. If the expected return on Asset D is 18%, the expected return on your po is 12% and the percentage of your wealth allocated to Asset C is 30%, what is the risk-free rate?Consider a single factor APT. Portfolio A has a beta of 2.0 and an expected return of 22%. Portfolio B has a beta of 1.5 and an expected return of 17%. The risk-free rate of return is 4%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _______. A. A; the riskless asset B. B; B C. A; A D. A; B E. B; AAssume that there are two factors that price assets. Interest rate rf = 4%. You have thefollowing information about two well-diversified arbitrage-free risky portfolios. (a) Calculate the risk premium of the two risk factors. (b) There is a third well-diversified portfolio with β1 = 1.1 and β2 = 0.9. What is thisportfolio’s arbitrage free expected return? (c) Suppose the forecasted return of the portfolio in the question (b) is 13.5%. Show how youcould construct an arbitrage portfolio.
- You currently have $100,000 invested in a portfolio that has an expected return of 12% and a volatility of 8%. Suppose the risk-free rate is 5%, and there is another portfolio that has an expected return of 20% and a volatility of 12%. a. What portfolio has a higher expected return than your portfolio but with the same volatility? b. What portfolio has a lower volatility than your portfolio but with the same expected return?You can invest in a portfolio of two assets: the riskfree asset with rate of return 6%, and a risky portfolio with expcected return 16% and stdev 30%. You optimally choose to invest equal amount in both assets. What is your risk aversion (keep 2 decimal places)? A=Assume the APT equation for portfolios A and B with the following system of equations: E[rA] = λ0 + (λ1)3 + (λ2)0.2 = 11.0 E[rB] = λ0 + (λ1)2 + (λ2)1 = 13.0 Assume the following: . The risk free rate is λ0 = Rf = 5 . The expected return on the market portfolio is RM = 10 . Expected returns are consistent with the CAPM. . (hint: note that λ1 = E[RA] − Rf and λ2 = E[RB] − Rf ). Answer the following: (a) What are λ1 and λ2? (b) What is the CAPM β associated with the pure portfolio associated with factor 1? (c) What is the CAPM β associated with the pure portfolio associated with factor 2?
- Suppose you have a portfolio that has $290 in stock A with a beta of 1.04, $1, 160 in stock B with a beta of1.34, and $870 in the risk-free asset. You have another $580 to invest. You wish to achieve a beta for yourwhole portfolio to be the same as the market beta. What is the beta of the added security?he risk free rate is 3%. The optimal risky portfolio has an expected return of 9% and standarddeviation of 20%. (a) Assume the utility function of an investor is U = E(r) − 0.5Aσ2. What is condition ofA to make the investors prefer the optimal risky portfolio than the risk free asset? (b) Assume the utility function of an investor is U = E(r) − 2.5σ2. What is the expectedreturn and standard deviation of the investor’s optimal complete portfolio?You are told that the expected return of the market portfolio is 10%, and its standard deviation is 10%. There exists a risk-free asset in the economy. You hold an efficient portfolio with an expected return of 12% and a standard deviation of 15%. [hint: The efficient portfolio is a combination of the market portfolio and the risk-free asset.] (1) In forming this efficient portfolio do you borrow or lend? Support your answer with relevant calculations. (2) What is the risk-free rate?