What are some examples of diversifiable risks? In other words, name some risks specific to individual...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
What are some examples of diversifiable risks? In other words, name some risks specific to individual companies that do not affect the stock market as a whole. 2) Assume the expected return of the stock market is 10% and the expected return for bonds is 5%. What is the expected return of a portfolio that is 60% stocks and 40% bonds? 3) Assume a stock earns the returns below with the associated probabilities. Probability Return -20% 10% 50% 40% What is the stock's expected return? 8% 12% 4) Using the data in question 3, what is the standard deviation of the stock's return? 5) A stock has a o of 15%, an expected return of 8%. The risk-free rate is 1%. a. What is the coefficient of variation? b. What is the Sharpe ratio? 6) Name an asset or industry that might have a negative beta. Explain your answer. 7) A stock has a beta of 1.2. The risk-free rate is 2%. The expected return of the whole stock market is 12%. Using the CAPM, what is the expected return of the stock? What are some examples of diversifiable risks? In other words, name some risks specific to individual companies that do not affect the stock market as a whole. 2) Assume the expected return of the stock market is 10% and the expected return for bonds is 5%. What is the expected return of a portfolio that is 60% stocks and 40% bonds? 3) Assume a stock earns the returns below with the associated probabilities. Probability Return -20% 10% 50% 40% What is the stock's expected return? 8% 12% 4) Using the data in question 3, what is the standard deviation of the stock's return? 5) A stock has a o of 15%, an expected return of 8%. The risk-free rate is 1%. a. What is the coefficient of variation? b. What is the Sharpe ratio? 6) Name an asset or industry that might have a negative beta. Explain your answer. 7) A stock has a beta of 1.2. The risk-free rate is 2%. The expected return of the whole stock market is 12%. Using the CAPM, what is the expected return of the stock?
Expert Answer:
Answer rating: 100% (QA)
1 Some examples of diversifiable risks are companyspecific events such as management changes lawsuit... View the full answer
Related Book For
Fundamentals of Investments Valuation and Management
ISBN: 978-0077283292
5th edition
Authors: Bradford D. Jordan, Thomas W. Miller
Posted Date:
Students also viewed these finance questions
-
What are some examples of asset misuse? Give at least three.
-
What are some examples of internal users of accounting information?
-
What are some examples of related parties?
-
The potential losses are sorted in the following table. The absolute VaR is 8 Million. What is the relative expected shortfall from the mean? Sorted returns Returns ( Million) -12 -10 -8 -6 -4 -3 -1.5
-
Fontana Co. began operations on July 1. It uses Instructions(a) Determine the ending inventory under a perpetual inventory system using (1) FIFO,(2) moving-average cost, and (3) LIFO.(b) Which...
-
When CrCl 3 dissolves in water, three different species can be obtained. (a) [Cr(H 2 O) 6 ]Cl 3 , violet (b) [Cr(H 2 O) 5 Cl]Cl 2 , pale green (c) [Cr(H 2 O) 4 Cl 2 ]Cl, dark green If diethyl ether...
-
What might cause board members to micromanage?
-
The Pearlsburg (West Virginia) Rescue Squad serves a mountainous, rural area in southern West Virginia. The only access to the homes, farms, and small crossroad communities and villages is a network...
-
Smith Company purchases components from three suppliers. Components purchased from Supplier A are priced at $5 each and used at the rate of 20,000 units per year. Components purchased from Supplier B...
-
Brentwood Bay Inc.s comparative balance sheet at September 30, 2020, and its 2020 income statement are shown below: Other information for the year ended September 30, 2020: a. Acquired equipment by...
-
A very long uniform line of charge has charge per unit length 4.54 C/m and lies along the x-axis. A second long uniform line of charge has charge per unit length -2.34 C/m and is parallel to the...
-
What is the major disadvantage of holding emergency funds in the form of bank deposits or short-term investments? Explain Briefly
-
On average, your firm sells $31,800 of items on credit each day. The average inventory period is 22 days and your operating cycle is 42 days. What is the average accounts receivable balance?
-
Aylmer Construction Company entered into a contract to build a hospital for the City of London. The contract began on January 1, Y3. It is estimated that construction will be complete at December 31,...
-
What is the adjusted cash balance per bank if the cash balance per the bank statement is $16,830, there are $7,565 of outstanding checks and $3,280 of deposits in transit?
-
Company Z" operates in the fast-food industry in your country and is facing a dilemma regarding its pricing strategy for its signature burger. Despite having a loyal customer base, the company is...
-
Selected financial data for Amberjack Corporation follows. Sales Year 1 ($ thousands) Year 2 ($ thousands) 477,721 339,270 Cost of goods sold 265,261 357,524 Net income ed (171,114) (405,109) Cash...
-
How does health insurance risk differ from other types of insurance risk (e.g., automobile or homeowners insurance)? What is the difference between cost sharing and cost shifting? Is retiree health...
-
What is the sustainable growth rate and required return for Abbott Laboratories? Using these values, calculate the 2008 share price of Abbott Laboratories Industries stock according to the constant...
-
The Emerging Growth and Equity Fund is a "low-load" fund. The current offer price quotation for this mutual fund is $27.52, and the front-end load is 1.5 percent. What is the NAV? If there are 15.6...
-
You purchased 2,000 shares in the New Pacific Growth Fund on January 2, 2008, at an offering price of $53.82 per share. The front-end load for this fund is 5 percent, and the back-end load for...
-
Joe, the nurse manager for CCU, counsels Registered Nurse Bob about his errors in charting and tells Bob that the next time an error is made, a formal warning will be put in his personnel file. Bob...
-
Which theorist helps a manager understand why an employee who does not feel safe on the job cannot perform his or her job duties well? A. Maslow. B. Herzberg. C. Vroom. D. Alderfer.
-
Research by Aiken et al. on magnet hospitals shows: A. Job satisfaction has no impact on an organizations effectiveness. B. Magnet hospitals have high turnover rates. C. Job satisfaction is...
Study smarter with the SolutionInn App