Question: Expected Return on Stock A 10.2 Expected Return on Stock B 5 Beta of stock A 1.8 Beta of stock B 0.4 risk free rate

Expected Return on Stock A 10.2
Expected Return on Stock B 5
Beta of stock A 1.8
Beta of stock B 0.4
risk free rate 3

Does the CAPM hold in this case?

a. Only for stock A

b. No

c. Only for stock B

d. Yes

e. Not enough information to determine

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!

Q:

4. Asset Expected Return Beta Firm Specific Standard Deviation Stock A 20 1.3 58 Stock B 18 1.8 78 8 0 Risk free rate Market standard deviation 25% a) What are the standard deviation of Stock A and...

Q:

Sameer Anand is a fund manager working with a long only PMS fund in Mumbai. After evaluating the company, industry and valuation attractiveness, he shortlisted 3 stocks from NSE to constitute his...

Q:

Abbotty Corporation's common stock has a beta of 1.25. Assume that you are a security analyst, and forecast an expected return of 15% for Abbotty stock over the next year. The market risk premium is...

Q:

15. Sam is an analyst for a pension fund, and he is assigned the task of evaluating a few different stocks Stock Q R S Expected return 18% 10% 25% 12% Beta 1.2 0.7 1.5 1.0 The market portfolio is 14...

Q:

Consider the following table: Expected return on stock A 15 Expected return on stock B 9 Beta of stock A 1.5 Beta of Stock B 0.5 Assume that the CAPM holds. What is the risk free rate?

Q:

2. Answer both Part(a) and Part(b) below (a) Roenfeld Corp believes the following probability distribution exists for its stock. What is the coefficient of variation on the company's stock? [10...

Q:

A portfolio consists of three stocks: Stock A, Stock B, and Stock C. The table below provides the covariances between the returns of each pair of stocks, the expected return for each stock, and the...

Q:

can you please do it and explain no u can do it by cov over protfolio of varince A portfolio consists of three stocks: Stock A, Stock B, and Stock C. The table below provides the covariances between...

Q:

can you plese explain how to do it what are u mean can u do it A portfolio consists of three stocks: Stock A, Stock B, and Stock C. The table below provides the covariances between the returns of...

Q:

Use the following information to solve 1, 2, and 3. Stock Y has a beta of 1.59 and an expected return of 25%. Stock Z has a beta of 0.44 and an expected return of 12%. If the risk free rate is 6% and...

Q:

Raul Dy and Hannah Dy (Husband & Wife) died in an car accident. The husband died a few hours before the wife died. They left properties owned (communal property) with a value of 24,000,000;...

Q:

A furniture company wants to test a random sample of sofas to determine how long the cushions last. They simulate people sitting on the sofas by dropping a heavy object on the cushions until they...

Q:

Kamiya has a strong desire to be influential in ber groap and so coetrol what goes on in ber envivoament. Which fype of aeeds would Kamiya be considered high in ? achievzenet ponter Wifintuitiration...

Q:

One year ago, you could have purchased a home for $400,000, making a 20% downpayment and borrowing the rest through a 30 year loan at a rate of 3%. If over the past year, home prices rose by 20% and...