Question: Assume the following values for a stock s return and the
Assume the following values for a stock’s return and the market return.
Plot the data and draw a line of best fit similar to that in Figure 17–11. No equation is necessary.
Answer to relevant QuestionsUsing the formulas in Appendix 17B, compute a least squares regression equation for problem 12. (Round beta and alpha to two places after the decimal point.) If the two investments above were perfectly positively correlated (rij = +1), what would be the portfolio standard deviation? Why is it said that zero-coupon bonds lock in the reinvestment rate? In problem 11, what is the annual percentage return? Use Appendix A at the end of the book to help you find the answer. An approximation will be sufficient. A 30-year, $1,000 par value zero-coupon bond provides a yield of 11 percent. a. Compute the current price of the zero-coupon bond. (Hint: Simply take the present value of the ending $1,000 payment). b. What is the duration ...
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