What is the covariance between each stock and the market index? Suppose that the index model for
Question:
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA = 3% 1 .7RM + eA
RB = 22% 1 1.2RM + eB
σM = 20%; R-squareA 5 .20; R-squareB = .12
Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 60% (15 reviews)
The ...View the full answer
Answered By
Saikumar Ramagiri
Financial accounting:- Journal and ledgers, preparation of trail balance and adjusted trail balance Preparation of income statement, retained earning statement and balance sheet Banks reconciliation statements Financial statement analysis Cash flow statement analysis (both direct and indirect methods) All methods of Depreciations Management Accounting:- Ratios Budgeting control Cash budget and production budget Working capital management Receivable management Costing:- Standard and variance costing Marginal costing and decision making Cost-volume-profit analysis Inventory management (LIFO, FIFO) Preparation and estimation of cost sheet Portfolio management:- Calculation of portfolio standard deviation or risk Calculation of portfolio expected returns CAPM, Beta Financial management:- Time value of money Capital budgeting Cost of capital Leverage analysis and capital structure policies Dividend policy Bond value calculations like YTM, current yield etc International finance:- Derivatives Futures and options Swaps and forwards Business problems Finance problems Education (mention all your degrees, year awarded, Institute/University, field(s) of major): Education Qualification Board/Institution/ University Month/Year of Passing % Secured OPTIONALS/ Major ICWAI(inter) ICWAI inter Pursuing Pursuing - M.com(Finance) Osmania University June 2007 65 Finance & Taxation M B A (Finance) Osmania University Dec 2004 66 Finance & Marketing. B.Com Osmania University June 2002 72 Income Tax, Cost & Mgt, Accountancy, Auditing. Intermediate (XII) Board of Intermediate May 1999 58 Mathematics, Accountancy, Economics. S S C (X) S S C Board. May 1997 74 Mathematics, Social Studies, Science. Tutoring experience: • 10 year experience in online trouble shooting problems related to finance/accountancy. • Since 6 Years working with solution inn as a tutor, I have solved thousands of questions, quick and accuracy Skills (optional): Technical Exposure: MS Office, SQL, Tally, Wings, Focus, Programming with C Financial : Portfolio/Financial Management, Ratio Analysis, Capital Budgeting Stock Valuation & Dividend Policy, Bond Valuations Individual Skills : Proactive Nature, Self Motivative, Clear thought process, Quick problem solving skills, flexible to complex situations. Achievements : 1. I have received an Award certificate from Local Area MLA for the cause of getting 100% marks in Accountancy during my Graduation. 2. I have received a GOLD MEDAL/Scholarship from Home Minister in my MBA for being the “Top Rank student “ of management institute. 3. I received numerous complements and extra pay from various students for trouble shooting their online problems. Other interests/Hobbies (optional): ? Web Surfing ? Sports ? Watching Comics, News channels ? Miniature Collection ? Exploring hidden facts ? Solving riddles and puzzles
4.80+
391+ Reviews
552+ Question Solved
Related Book For
Question Posted:
Students also viewed these Accounting questions
-
With correlation of 0.3, what is the covariance between the 3-year returns? Greta, an elderly investor, has a degree of risk aversion of A = 3 when applied to return on wealth over a 3-year horizon....
-
Suppose that the index model for stock A and B is estimated from excess returns with the following result: R A = 3% + 7R M +eA R B = -2% +1.2 R M + eB M = 20% R-square A = 20 R-sqaure B = 12 What...
-
Suppose that the index model for stock A and B is estimated from excess returns with the following result: R A = 3% + 7R M +eA R B = -2% +1.2 R M + eB M = 20% R-square A = 20 R-sqaure B = 12 What...
-
Nine friends vote on their favorite fruit. Only one person in the group votes for kiwi. Choose the decimal that is equivalent to this fraction.
-
You have purchased four tickets to a charity raffle. Only 50 tickets were sold. Three tickets will be drawn, and first, second, and third prizes will be awarded. a. What is the probability that you...
-
The International Nanny Association reports that in a sample of 528 in-home child care providers (nannies), 20 work for either a nationally known, a locally known, or an internationally known...
-
This exercise explores the sensitivity of \(\log\)-optimality to the rebalancing frequency. Consider a market consisting of a risk-free asset with zero rate of interest and a stock that over 1 year...
-
Kiel Centers sales are all made on account. The firms collection experience has been that 35% of a months sales are collected in the month the sale is made, 55% are collected in the month following...
-
Firm A has net fixed assets of $100 in 2007 and it is operating at 90% capacity. Assume it cannot dispose of its redundant fixed assets . In 2008, sales are projected to grow by 30% . How much net...
-
Bright Sparks Electrical - Bank Register Report: Now that you have completed the journals for the month, you need to prepare the Bank Register Report in the template below. Not all general journals...
-
What are the covariance and correlation coefficient between the two stocks? Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3% 1 .7RM...
-
For portfolio P with investment proportions of .60 in A and .40 in B, rework Problems 9, 10, and 12. Suppose that the index model for stocks A and B is estimated from excess returns with the...
-
Blood is pumped via heart contractions triggered by action potentials spreading through the heart muscle. If there is a sudden increase in blood in chamber 3, which chamber of the heart received an...
-
The local dry cleaner is concerned about the risks from its use of chemicals, which evaporate into the air and occasionally are spilled onto the ground. The cleaner is concerned about liability for...
-
What continuous uniform series of cash flows over 7 years can be paid out of a fund having $20,000 at the present (or time 0) if interest is 10 percent compounded continuously?
-
If a potential victim can take precautions to avoid an accident (such as looking both ways before crossing a street), which liability system yields more efficient levels of precaution, strict...
-
Describe how a tax scheme could be used to regulate automobile pollution in an urban area.
-
In the early 1990 s, the chief economist of the World Bank came under a great deal of criticism for suggesting that developing countries take advantage of opportunities to import hazardous and...
-
Diabetes is a global epidemic affecting more than 240 million people worldwide. The vast majority of the cases are Type 2. Recently a drug, Januvia (J), was discovered to treat Type 2 diabetes. When...
-
A consultant is beginning work on three projects. The expected profits from these projects are $50,000, $72,000, and $40,000. The associated standard deviations are $10,000, $12,000, and $9,000....
-
The owner of a factory regularly requests a graphical summary of all employees salaries. The graphical summary of salaries is an example of descriptive statistics inferential statistics?
-
Turn back to Figure 2.9 and look at the Apple options. Suppose you buy an August expiration call option with exercise price $355. a. If the stock price in August is $367, will you exercise your call?...
-
Examine the stocks listed in Figure 2.8. For how many of these stocks is the 52-week high price at least 50% greater than the 52-week low price? What do you conclude about the volatility of prices on...
-
Examine the stocks listed in Figure 2.8. For how many of these stocks is the 52-week high price at least 50% greater than the 52-week low price? What do you conclude about the volatility of prices on...
-
Briefly define TinyOS and explain its goals as an embedded operating system.?
-
Consider the graph shown on the right. Find the strongly connected components of the graph. Whenever you use DFS and there is a choice of nodes to explore, always pick the one that is alphabetically...
-
After viewing the previous video, "Types of Operating Systems As Fast As Possible", explain the difference between embedded operating systems and desktop operating systems. (300-yep, you guessed it)...
Study smarter with the SolutionInn App