Using 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.)
Answer to relevant QuestionsUse the beta (bi) from problem 13, and plug it into the formula for the security market line (Formula 17–7). Assume the risk-free rate (RF) is 7 percent and the market rate of return (KM) is 12.6 percent. What is the value ...Assume the following risk-return possibilities for 10 different portfolios. Plot the points in a manner similar to Figure 17–3 and indicate the approximate shape of the efficient frontier. Is the locked-in reinvestment assumption valid for zero-coupon bonds if they are sold before maturity? Explain. Use Figure 18-2 and the modified duration for the securities given to answer the following questions. a. Compute the expected change in price for the 30-year Treasury if interest rates go up by 75 basis points. Assuming the ...Assume you buy a 20-year, $1,000 par value zero-coupon bond that provides a 10 percent yield. Almost immediately after you buy the bond, yields go down to 8 percent. a. What will be your gain on the investment? b. What will ...
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