Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Chapter 7, Problem 33PS
Suppose there are two independent economic factors, M1and M2. The risk-free rare is 7% and all stocks have independent firm specific components with a standard deviation of 50%. Portfolios A and B are both well diversified.
Portfolio Beta on M1 Beta on M2 Expected Return (%) A .8 2.1 40 B 2.0 –0.5 10
What is the expected return−beta relationship in this economy’? (LO 7-5)
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Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firm-specific components with a standard deviation of 49%. Portfolios A and B are both well diversified.
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Beta on M1
Beta on M2
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A
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2.4
39
B
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-0.7
9
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What is the expected return–beta relationship in this economy?
Suppose there are two independent economic factors, M₁ and M₂. The risk-free
rate is 4%, and all stocks have independent firm-specific components with a
standard deviation of 41%. Portfolios A and B are both well diversified.
Portfolio Beta on M₁
Beta on M₂ Expected Return (%)
A
B
1.8
2.2
2.3
-0.5
31
9
What is the expected return-beta relationship in this economy
Suppose that there are two independent economic factors, F₁ and F₂. The risk-free rate is 6%, and all stocks have independent firm-
specific components with a standard deviation of 45%. The following are well-diversified portfolios:
Portfolio Beta on F1
A
B
E(rp)
1.5
2.2
=
What is the expected return-beta relationship in this economy? (Do not round intermediate calculations.)
Beta on F2
2.0
-0.2
% + (Bp1 x
Expected
Return
31%
27%
%) + (Bp2 x
Chapter 7 Solutions
Essentials Of Investments
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Ch. 7 - Consider the following table, which gives a...Ch. 7 - Prob. 13PSCh. 7 - Prob. 14PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 16PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 18PSCh. 7 - Prob. 19PSCh. 7 - Prob. 20PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Prob. 22PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Two investment advisers are comparing performance....Ch. 7 - Suppose the yield on short-term government...Ch. 7 - Based on current dividend yields and expected...Ch. 7 - Consider the following data for a single index...Ch. 7 - Assume both portfolios A and B are well...Ch. 7 - Prob. 29PSCh. 7 - Prob. 30PSCh. 7 - Et
Ch. 7 - Suppose two factors are identified for the U.S....Ch. 7 - Suppose there are two independent economic...Ch. 7 - As a finance intern at Pork Products, Jennifer...Ch. 7 - Suppose the market can be described by the...Ch. 7 - Which of the following statements about the...Ch. 7 - Kay, a portfolio n1anacr at Collins Asset...Ch. 7 - Prob. 3CPCh. 7 - Jeffrey Bruner, CFA, uses the capital asset...Ch. 7 - Prob. 5CPCh. 7 - According to CAPM, the expected rate of a return...Ch. 7 - Prob. 7CPCh. 7 - Prob. 8CPCh. 7 - 9. Briefly explain whether investors should expect...Ch. 7 - Assume that both X and Y are well-diversified port...Ch. 7 - Prob. 11CPCh. 7 - 12. A zero-investment, well-diversified portfolio...Ch. 7 - 13. An investor takes as large a position as...Ch. 7 - In contrast to the capital asset pricing model,...Ch. 7 - Prob. 1WMCh. 7 - Prob. 2WMCh. 7 - Prob. 3WMCh. 7 - a. Which of the stocks would you classify as...
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