Question: 4. Your forecasting model projects an expected return of 17.25% for Stock A and an expected return of 33.75% for Stock B. Using the information

4. Your forecasting model projects an expected return of 17.25% for Stock A and an expected return of 33.75% for Stock B. Using the information in questions 1 and 2 and your forecasted expected returns, what is your best estimate of the alpha of your portfolio when using CAPM to determine a fair level of expected return?

1. The expected rate of return on the market portfolio is 11.50% and the riskfree rate of return is 2.00%. The standard deviation of the market portfolio is 19.75%. What is the representative investors average degree of risk aversion?

2. Stock A has a beta of 1.50 and a standard deviation of return of 32%. Stock B has a beta of 3.50 and a standard deviation of return of 58%. Assume that you form a portfolio that is 45% invested in Stock A and 55% invested in Stock B. Using the information in question 1, according to CAPM, what is the expected rate of return on your portfolio?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Can someone help me with my assignment? I need it by Monday 2pm EDT. File is attached. Thanks! ***NOTES FROM PROFESSOR*** Dear Students, The iShares 13 Year Treasury Bond ETF (SHY)is a short term...

Good Evening: Is there any way possible you are able to work on this assignment and show your work on excel? If so, please let me know as soon as you can. My deadline is this Thursday, 2/8/16 by 1pm....

Q1: Index Models: Version A: Download 61 months (September 2010 to September 2015) of monthly data for the SPDR S&P 500 Index ETF (symbol = SPY). Download 61 months (September 2010 to September 2015)...

1. The expected rate of return on the market portfolio is 9.50% and the riskfree rate of return is 1.00%. The standard deviation of the market portfolio is 17.75%. What is the representative...

I need help putting the below assignment together in excel. I the solutions to be in excel so that I can cross reference with my notes. Thanks FIN 5620-EVT: Jack De Jong: Quantitative Problem Set #3:...

Please calculate work in excel and attach as excel doc to see work. I need this within the next 2 hours maximum! Thanks! CAPM and APT: 1. The expected rate of return on the market portfolio is 9.75%...

Q2: CAPM and APT: 1. The expected rate of return on the market portfolio is 8.50% and the riskfree rate of return is 2.50%. The standard deviation of the market portfolio is 24%. What is the...

Q2: CAPM and APT: 1. The expected rate of return on the market portfolio is 9.75% and the risk-free rate of return is 1.50%. The standard deviation of the market portfolio is 19.75%. What is the...

A conventional assumption in production theory is free disposal, namely y Y y Y for every y x where x > x means that xi >...

An interior zone of a large building is designed to have a supply air-flow rate of ( 2.4 m/s). The cooling load is constant at (35 kW) with a SHF 0.8 year-round. Indoor conditions are (24C) db and 50...

A company reports budgeted overhead cost of $ 1 , 0 1 0 , 0 0 0 for its Assembly department and $ 6 0 5 , 0 0 0 for its Painting department. Additional information follows. \ table [ [ Department ,...

With regard to a limited partner's capital contribution to the limited partnership: the limited partner can only contribute cash. a promise by a limited partner to contribute to the limited...

3. In this chapter, we talked about some of the challenges that todays organizations face, including work-life balance, sexual harassment, and communication technology. Does your organizationbe it a...

4. Its Tuesday, and you arrive home at 5:30 p.m. How do your housemates or family react? A. They say hello and discuss dinner plans. B. They act surprisedthey never know if youll be on time or not....

3. Which statement best describes what you usually do on vacation? A. I kick back, relax, and savor the time off. B. I check in with my organization at least once so that people know Im available. C....