Use the following information to answer the questions. Security Beta Standard Deviation Expected return S&P 500 Risk-free
Fantastic news! We've Found the answer you've been seeking!
Question:
- Use the following information to answer the questions.
Security | Beta | Standard Deviation | Expected return |
S&P 500 Risk-free security Stock D Stock E Stock F | 1.0 0.0 ( ) 0.8 1.2 | 20% 0% 30% 15% 25% | 10.0% 4.0% 13.0% ( )% ( )% |
- Figure out the market risk premium using both S&P 500 and the risk-free security. (20points)
- Figure out the beta for Stock D and the expected return for Stock E using the CAPM equation. (30points)
- i) Figure out the expected return for Stock F based on the CAPM equation and the beta of 1.2. ii) If Stock F has an average return of 16%, figure out the abnormal return, alpha (?), for Stock F. (30points)
- Suppose that you form a portfolio with two stocks E and F along with the S&P portfolio. When their weights are 0.3, 0.5, and 0.2 respectively, figure out the beta of your portfolio. (20points)
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: