A security has a beta of 1.2. Is this security more or less risky than the market?
Question:
A security has a beta of 1.2. Is this security more or less risky than the market? Explain. Assess the impact on the required return of this security in each of the following cases.
a. The market return increases by 15%.
b. The market return decreases by 8%.
c. The market return remains unchanged.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 80% (10 reviews)
A beta of 12 suggests that this security is 20 riskier tha...View the full answer
Answered By
Nandana Wijayarathna
I am a highly experienced writer in several areas,
Business management
Information technology
Business administration
Literature
Biology
Environmental science
History
4.50+
161+ Reviews
399+ Question Solved
Related Book For
Fundamentals Of Investing
ISBN: 9780135175217
14th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
Question Posted:
Students also viewed these Business questions
-
A security has a beta of 1.2. Is this security more or less risky than the market? Explain. Assess the impact on the required return of this security in each of the following cases. a. The market...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Goods 1 and 2 are available at dollar prices of p1 per unit of Good 1 and p2 per unit of Good 2. A utility function U(x 1 , x 2 ) is a function representing the utility or benefit of consuming xj...
-
What variables influence the demand for a normal good? Explain why a reduction in the price of a normal good does not increase the demand for that good.
-
Redraw Figure 11.2 using the following scenario: Figure 11.2 a. Frame 0 is sent, but lost. b. Frame 0 is resent and acknowledged. c. Frame 1 is sent and acknowledged, but the acknowledgment is lost....
-
Evaluate the materiality and audit risk for investing cycle balances.
-
Cummins, the newly hired controller at Merced Home Products, Inc., was disturbed by what she had discovered about the standard costs at the Home Security Division. In looking over the past several...
-
You see your colleague getting bullied at work. List the actions you could take if you witnessed bullying in the workplace. Feel free to MAKE a scenario or a real-life event (if any)
-
Skillings Industrial Chemicals, Inc., operates a refinery in southwestern Ohio near the Ohio River. The companys primary product is manufactured from a chemical process that requires the use of two...
-
Joseph is reviewing his portfolio, which includes certain stocks and bonds. He has a large amount tied up in U.S. Treasury bills paying 2%. He is considering moving some of his funds from the T-bills...
-
Last year, Rocket Inc. earned a 20% return. Farmers Corp. earned 10%. The overall market return last year was 16%, and the risk-free rate was 2%. If Rocket stock has a beta of 2.0 and Farmers has a...
-
What is the most important factor to consider when determining the elements of the marketing mix?
-
1-Is it a good business strategy to have a day care center, Harley Davidson Motorcycle Dealership Sales and repair, Namaste Yoga studio, bookstore, temporary worker (day laborer) center, state prison...
-
2 Part C. Questions 11-13 [ Video-8, others if needed or desired] Two time series are being considered and both contain random, seasonal, and linear trend components. However, the characteristic of...
-
Section 1 - Required Savings for Retirement The Association of Super Funds Australia (ASFA) suggests that to achieve a modest retirement lifestyle, a couple would require $45,800 a year (based on...
-
Activity 3-Header Checksum Materials: Wireshark and an active connection 1. If you haven't already, open Wireshark and capture an IP packet. 2. Find the value of the header checksum. 3. Take a look...
-
In the C++ programming language, one can do file I/O via so-called streams. In the operation ostream < < 42 < < "universe", ostream is an output stream, and < < is a binary infix operator that...
-
In each case, find all [a b c d]T m R4 such that the given set is orthogonal. (a) {[1 2 1 O]T, [1 -1 1 3]T, [2 -1 0 -1], [a b c d]T} (b) {[1 0 - 1]T, [2 1 1]T,[l -3 1 0]T, [a b c d}T}
-
Huntingdon Capital Corp. is a competitor of Plazacorp and First Capital Realty. Huntingdon reported the following selected information (in millions):...
-
Referring to Problem earlier, what would happen if you constructed a portfolio consisting of assets A, B, and C, equally weighted? Would this reduce risk or enhance return? In problem Expected Return...
-
Assume you wish to evaluate the risk and return behaviors associated with various combinations of assets V and W under 3 assumed degrees of correlation: perfect positive, uncorrelated, and perfect...
-
The following table contains annual returns for the stocks of Home Depot (HD) and Lowes (LOW). The returns are calculated using end-of-year prices (adjusted for dividends and stock splits) retrieved...
-
Should an MNC purchase Nestl stock yes or no? Recommendations should include the company's sustainability plans, the image of the company, Gordon Growth result, and financial performance. Any...
-
Can the sponsor, or general partner, continue to achieve such high returns? Framed another way, can the general partner earn a 25+% return on the $6,305,000 received at the end of the 10th year? If...
-
Select a hospital that publicly displays their financial performance on their website. Describe the Profit Loss Statement: Review top revenue items Review cost comparison compared to previous year...
Study smarter with the SolutionInn App