EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 8, Problem 15PS
A
Summary Introduction
To calculate: The value of the adjusted beta of the stock.
Introduction: The value of beta is used to calculate the systematic risk of the stock. This risk is unpredictable in nature and cannot be removable. The value of beta is always unity.
B
Summary Introduction
To calculate: The predicted beta value for the next year.
Introduction: To calculate the value of systematic risk of the portfolio, beta value is used. Systematic risks are unavoidable in nature. It is known as the diversified risk or market risk.
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Students have asked these similar questions
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. 0.81
You are given the following returns on "the market" and Stock F during the last three years. We could calculate beta using data for Years 1 and 2 and then, after Year 3, calculate a new beta for Years 2 and 3. How different are those two betas, i.e., what's the value of beta 2 - beta 1? (Hint: You can find betas using the Rise-Over-Run method, or using your calculator's regression function.)
Year
Market
Stock F
1
6.10%
19.50%
2
12.90%
−3.70%
3
16.20%
21.71%
A. 10.96
B. 10.91
C. 11.06
D. 11.01
E. 11.11
Note:-
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Answer completely.
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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
0.16
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Portfolio return, variance, standard deviation; Author: MyFinanceTeacher;https://www.youtube.com/watch?v=RWT0kx36vZE;License: Standard YouTube License, CC-BY