Stock Y has a beta of 1.2 and an expected return of 14.5 percent. Stock Z has a beta of .7 and an return of 9.3 percent. If the risk-free rate is 5.6 percent and the market risk premium is 6.6 percent,
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- Problem 11-19 Reward-to-Risk Ratios [LO 4] Stock Y has a beta of 1.35 and an expected return of 13.0 percent. Stock Z has a beta of .80 and an expected return of 10.5 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Risk-free rate %11.18 Reward-to-Risk Ratios Stock Y has a beta of 1.15 and an expected return of 11.8 percent. Stock Z has a beta of .85 and an expected return of 10.7 percent. If the risk-free rate is 4.5 percent and the market risk premium is 7.1 percent, are these stocks correctly priced?Question 29 Assume the following data for a stock: risk-free rate 5 percent: beta (market) = 1.4; beta (size) - 0.4; beta (book-to- market)-1.1; market risk premium - 13 percent; size risk premium 9.7 percent; and book-to-market risk premium = 11.2 percent. Calculate the expected return on the stock using the Fama-French three-factor model. O 26.5 percent 14.8 percent O 25.1 percent 12.0 percent
- Problem 13-19 Reward-to-Risk Ratios [LO4] Stock Y has a beta of 1.4 and an expected return of 15.2 percent. Stock Z has a beta of 7 and an expected return of 9.1 percent. What would the risk-free rate have to be for the two stocks to be correctly priced? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate % 24Question 25 (2.5 points) Listen The risk-free rate is 1.45% and the market risk premium is 5.21%. According to the Capital Asset Pricing Model (CAPM), a stock with a beta of 1.13 will have an %. expected return of 1) 7.34% 2) 15.66% 3) 5.56% 4) 9.12% 5) 13.25%Question 4 The risk-free rate of return is 2.7 percent, the inflation rate is 3.1 percent, and the market risk premium is 6.9 percent.What is the expected rate of return on a stock with a beta of 1.08?Select one:A. 12.22 percentB. 11.47 percentC. 10.15 percentD. 10.92 percent
- Question 16 a. Based on the following information, calculate the expected return and standard deviation for each of the following stocks. What are the covariance and correlation between the returns of the two stocks? Calculate the portfolio return and portfolio standard deviation if you invest equally in each asset. Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the Page 7 of 33 expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 55 percent? c. Suppose the risk-free rate is 4.2 percent and the market portfolio has an expected return of 10.9 percent. The market…Problem 13-26 Systematic versus Unsystematic Risk [LO3] Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy 28 53 19 Rate of Return if State) Occurs The standard deviation on Stock I's return is t deviation on Stock It's return is stock's systematic risk/beta, Stock Stock I .05 17 .06 Stock Il -20 .07 40 The market risk premium is 8 percent, and the risk-free rate is 2 percent. (Do not round. intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimal places, e.g., 32.16.) percent, and the Stock I beta is percent, and the Stock ill beta is "riskier". The standard Therefore, based on theProblem 13-18 Optimal Sharpe Portfolio Value-at-Risk (LO3, CFA6) You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 10 percent and 13 percent. respectively. The standard deviations of the assets are 32 percent and 40 percent, respectively. The correlation between the two assets is 47 and the risk-free rate is 3.6 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 16 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your Sharpe ratio answer to 4 decimal places and the z-score value to 3 decimal places when calculating your answer. Enter your smallest expected loss as a percent rounded to 2 decimal places.) Sharpe ratio Smallest expected loss %
- Question 16 RWJ 13-2 CF Stock COOL has an expected return of 10.47 %. The expected market return is 8.31% and the risk-free rate is 4.73%. What is asset COOL’s beta? Question 17 RWJ 13-4 Joe is an analyst with Pomona Securities. His research shows that CPP Enterprises has an expected return of 12%. He also estimated the required rate for return using the Security Market Line for CPP Enterprises to be 10.30%. CPP Enterprises is: Group of answer choices Fairly priced Underpriced Overpriced CPP Enterprises is a bad investmentProblem 10-11 Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Risk Premium 6% 2% 5% Factor Industrial production (I) Interest rates (R) Consumer confidence (C) The return on a particular stock is generated according to the following equation: r=15% +1.4/+0.7R+0.90C+ e a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 7%. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Equilibrium rate of return a-2. Is the stock over- or underpriced? O Underpriced Overpriced %