Question: A stock's beta is 1.4, its standard deviation is 30% and you expect that it will earn 12% expected return. The risk free rate is

A stock's beta is 1.4, its standard deviation is 30% and you expect that it will earn 12% expected return. The risk free rate is 3% and the market's expected risk premium is 8%. The stock plots ________ (above/below) the SML and according to the CAPM it is _________ (underpriced/overpriced). The stock's Jensen's alpha is ______ % (rounded to two decimals), its Treynor measure is ___________ (no units,use numbers in decimals to calculate) and is Sharpe ratio is ________ (no units,use numbers in decimals to calculate) .

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!

A Prestige Popcorn's beta is 1.4, its standard deviation is 30% and you expect that it will earn 12% expected return. The risk free rate is 3% and the market's expected risk premium is 8%. The stock...

Retained earnings dont pay interest or dividends, but investors still expect to earn a return on the earnings that the firm reinvests on their behalf. Use the following information to estimate an...

QUESTION I: Suppose the standard deviation is 30%, current stock price is K100, exercise price is K100, risk free rate is 5%, dividend yield is 3% and time to maturity is 12. Calculate the value of...

Risk Free Rate 3% Market Return 8% ERP = Market return Rf = 5% Perpetuity Growth Rates Dividend Growth Rate 3% FCFF Growth Rate 3% FCFE Growth Rate 3% Tax rate 21%. What is the average annual...

Calculate the following problems using Microsoft Excel. The calculations must be done in Excel. You must show your work. If you submit these in Word, you will not receive credit. If you do not show...

Here is all info 5. Last, you will consolidate the calculated balance sheet for PAN and the actual balance sheet for JTM and calculate the three ratios shown in the JTM balance sheet. Show Juon...

JTM Airlines, a privately held firm, is looking to buy additional gates at its home airport for $1,200,000. It has money in the bank, but that money may not be spent as it is used to pay salaries,...

Handy Hardware Store currently uses a periodic inventory system. Peggy Yang, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory...

3. Discuss adverse effects of cytotoxic antineoplastic drugs and their prevention or management. 4. Apply patient education regarding the administration of some anticancer drugs. 5. Understand how to...

A changing magnetic flux produce a magnetic field an electric field an induced current

Find the radius of gyration of a plate covering the region bounded by x=3, x=5, y=0, and y=4 with respect to the y-axis.

(Appendices) ENDING INVENTORY, COST OF GOODS SOLD, AND GROSS MARGIN. Wilson Company sells a single product. At the beginning of the year, Wilson had 120 units in stock at a cost of $8 each. During...

(Appendices) SALES RETURNS. Swan and Bloom, Inc., is a wholesaler of novelty items to small stores. All sales are on credit with no discount offered. During March, Swan and Bloom accepted the...

(Appendices) INTERNAL CONTROL FOR SALES. Alcoa Building Products distributes aluminum siding and related building products to building contractors, all of whom purchase on credit. LO6 REQUIRED: List...