Question: A security's beta coefficient will be negative if____. A. Its returns are negatively correlated with the market B. Its returns are positively correlated with the

A security's beta coefficient will be negative if____. A. Its returns are negatively correlated with the market B. Its returns are positively correlated with the market C. Its idiosyncratic risk is zero D. Its returns are uncorrected with the market E. Its returns are perfectly correlated with the market The risk free rate is 5% and the expected rate of return on the market is 12%. A share of Duff Brewing Co. is now selling for exist8. It is expected to pay a dividend of exist0.30 next year and to then sell for exist8.50. Its beta is 0.8. According to the CAPM, is Duff fairly priced, underpriced, or overpriced? Explain. Your portfolio consists of exist70,000 invested in a stock with a beta of 1.4 and exist30,000 invested in a stock with a beta of 0.4. The risk free rate is 4% and the market risk premium is 6%. What is your portfolio's required rate of return

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!

1.The term excess return refers to ______________. a. returns earned illegally by means of insider trading b. the difference between the rate of return earned and the risk-free rate c. the difference...

19) What is the standard deviation of a portfolio of two stocks given Stock A has the following data: portfolio contains 40% of stock A, and the correlation coefficient between the two stocks is -23....

8 A security's beta coefficient will be negative if _ A. its returns are negatively correlated with market-index returns B. its returns are positively correlated with market-index returns C. its...

Name what is the EAR if the APR is 10% with weekly B. C. D. 6, 10.38% 10.4 7% 10.51% 11.88% HPR 7Suppose your expectations rega regarding t Probabilit. State of the Economy 4-4% 0.3 Boom Normal...

A security's beta coefficient will be positive if O its returns are negatively correlated with market-index returns. O its returns are positively correlated with market-index returns. O its stock...

1. Other things equal, diversification is most effective when (Single Choice) securities' returns are uncorrelated. securities' returns are positively correlated securities' returns are high...

A stock's beta value will be negative if O its returns are positively correlated with the market portfolio's returns O its returns are negatively correlated with the market portfolio's returns O its...

Speculation is undertaken despite the risk because: speculation inevitably provides for recovery of losses. speculators enjoy taking risks. speculators expect a risk-return trade-off. speculation...

PartI. (Sentence Correction) All of the following statements are false. Please change the incorrect parts to make them true. DO NOT negate the sentence, unless necessary. The capital allocation line...

Problem 1. Consider the following two stocks, A and B. Stock A has an expected return of 10%, 10% standard deviation, and a beta of 1.20. Stock B has an expected return of 14%, 25% standard...

A U.S. penny has a diameter of 1.9000 cm at 20.0C. The coin is made of a metal alloy (mostly zinc) for which the coefficient of linear expansion is 26 X 10-5 K-1. What would its diameter be on a hot...

James Harvey runs a stationery supplies shop. He is convinced that one of his employees is stealing stationery. He asks you to calculate from the accounting records the value of stock stolen. The...

Answer for me Which one of the following represent the environment that needs to be considered in making international market entry decisions? A Political, Economic, Social, Technological, Ethical,...

10) For a bond that pays cash interest (i.e., not a zero coupon bond), YTM is (a) always equal to the coupon rate (b) always equal to the current yield (c) is always less than the coupon rate (d) can...

4. Think of a topic that you find excruciatingly dull (for example, balancing your checkbook, studying for a required course you dont like, or taking a summer or part-time job doing something utterly...

2. Informative speeches are everywherein your classroom, on the news, and in your community. Watch an informative speech (or read a transcript, available at the Web sites of many government agencies...

5. Imagine a process you do every day, such as driving a car. Think about how you would explain the process to someone whos never done it or even seen it done before. Consider different ways you...