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- Suppose the following equation best describes the evolution of β over time: t = 0.18 + 0.63βt – 1. If a stock had a β of 1.09 last year, you would forecast the β to be _______ in the coming year. A. 0.18 B. 0.63 C. 0.87 D. 0.81Suppose the following equation best describes the evolution of β over time: βt = 0.3 + 0.2βt – 1 If a stock had a β of 0.8 last year, you would forecast the β to be _______ in the coming year. A. 0.60 B. 0.94 C. 0.70 D. 0.46The 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): %
- The market and Stock J have the following probability distributions: ProbabIlity rM rJ 0.3 15% 20% 0.4 9 5 0.3 18 12 A. Calculate the expected rates of return for the market and Stock J. B. Calculate the standard deviations for the market and Stock JThe market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 5 0.3 18 12 Calculate the expected rates of return for the market and Stock J. Calculate the standard deviations for the market and Stock J. Calculate the coefficients of variation for the market and Stock J.1. Using the factor beta estimates and the monthly expected return estimates in the table shown here, calculate the risk premium of General Electric stock (ticker: GE) using the FFC factor specification. (Annualize your result by multiplying by 12.) GE's CAPM beta over the same time period was 1.02. How does the risk premium you would estimate from the CAPM compare? FACTOR FACTOR AVERAGE MONTHLY RETURN GE'S BETAS MKT SMB HML 0.68 0.20 0.35 PR1YR 0.64 0.67 0.48 0.36 -0.70
- The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 20%. If the correlation between Stock A and the market is 0.70, then what is Stock A’s beta?Given the following probability distributions, what are the expected returns for the Market and for Security J? Statei Pr i rM rJ 1 0.3 −10% 40% 2 0.4 10 −20 3 0.3 30 30Given the following probability distributions, what are the expected returns for the Market and for Security J? Statei Pr i rM rJ 1 0.3 −10% 40% 2 0.4 10 −20 3 0.3 30 30 Group of answer choices 10.0%; 11.3% 9.5%; 13.0% 10.0%; 9.5% 10.0%; 13.0% 13.0%; 10.0%
- Expected Returns: Discrete Distribution The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 7 0.3 18 10 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): %5. Given the following expectations for the next year, what is the expected return, standard deviation, and beta of Stock A? Use the excel sheet we covered to find the answer. Returns Probability Stock A Market 0.10 0.05 0.02 0.25 0.09 0.08 0.30 0.13 0.12 0.25 0.19 0.15 0.10 0.21 0.16Consider the following average annual returns for Stocks A and B and the Market. Which of the possible answers best describes the historical betas for A and B? Years Market Stock A Stock B 1 0.03 0.16 0.05 2 −0.05 0.20 0.05 3 0.01 0.18 0.05 4 −0.10 0.25 0.05 5 0.06 0.14 0.05 a. bA > +1; bB = 0. b. bA = 0; bB = −1. c. bA < 0; bB = 0. d. bA < −1; bB = 1. e. bA > 0; bB = 1.
