Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 6, Problem 21PS
The following figure shows plots of monthly
a. Which stock is riskier to an investor currently holding a diversified portfolio of common stock?
b. Which stock is riskier to an undiversified investor who puts all of his funds in only one of these stocks?
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he table below shows information for 3 stocks.
Security
Beta
Risk-free rate
Expected market return
Stock 1
1.9
0.02
0.09
Stock 2
1.2
0.035
0.09
Stock 3
0.2
0.015
0.09
The risk-free rates are different because they were measured in different years. Calculate the expected (or required) return for each stock, using the Capital Asset Pricing Model (CAPM).
What is the required return for stock 1?
What is the required return for stock 2?
What is the required return for stock 3?
The following figure shows plots of monthly rates of return and the stock market for two stocks.
Is stock A riskier to an investor currently holding a diversified portfolio of common stock?
O Yes
O No
QUESTION 8
Problem 6.4 (b)
The following figure shows plots of monthly rates of return and the stock market for two stocks.
Is stock A riskier to an undiversified investor who puts all of his funds in only one of these stocks
O Yes
O No
Following are the probability distribution of returns of portfolio of Stock A and Stock B in equal proportion
of weight in each state of economy. You are required to calculate Expected Return and Risk for individual
Stocks?
State of Economy
1
2
3
4
5
Probability
0.2
0.2
0.2
0.2
0.2
Return on Stock A
(%)
15
(5)
5
35
25
Return on Stock B
(%)
(5)
15
25
5
35
If you deposit Rs. 1,000 in the bank at a nominal interest rate of 6 percent, you will have Rs. 1,060 at the
end of the year. Suppose that the inflation rate during the year is also 6 percent. Find real amount in Peso?
Chapter 6 Solutions
Essentials Of Investments
Ch. 6.5 - Prob. 1EQCh. 6.5 - In light of each firm’s exposure to the financial...Ch. 6 - Prob. 1PSCh. 6 - When adding a risky asset to a portfolio of many...Ch. 6 - A portfolio’s expected return is 12%, its standard...Ch. 6 - An investor ponders various allocations to the...Ch. 6 - The standard deviation of the market-index...Ch. 6 - Suppose that the returns on the stock fund...Ch. 6 - Use the rate-of-return data for the stock and bond...Ch. 6 - Prob. 8PS
Ch. 6 - Prob. 9PSCh. 6 - Prob. 10PSCh. 6 - Prob. 11PSCh. 6 - Prob. 12PSCh. 6 - Stocks offer an expected rate of return of 10%...Ch. 6 - Suppose that many stocks are traded in the market...Ch. 6 - You can find a spreadsheet containing annual...Ch. 6 - Assume expected returns and standard deviations...Ch. 6 - Prob. 17PSCh. 6 - Prob. 18PSCh. 6 - A project has a 0.7 chance of doubling your...Ch. 6 - Investors expect the market rate of return this...Ch. 6 - The following figure shows plots of monthly rates...Ch. 6 - Prob. 22PSCh. 6 - Prob. 23PSCh. 6 - Prob. 25CCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Abigail Grace has a $900,000 fully diversified...Ch. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 7CPCh. 6 - Prob. 1WMCh. 6 - Following the procedures in the previous question,...Ch. 6 - Prob. 3WMCh. 6 - Prob. 4WM
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