GRE Inc is a well-established IT company in the US. In the recent past the variance...

 

Transcribed Image Text:

GRE Inc is a well-established IT company in the US. In the recent past the variance of its annual share return has been 25(%) while the S&P500 composite index has had an average annual return of 5% and a variance of return of 36(%). The returns on GRE Inc have a coefficient of correlation of 0.7 with the market index. Required: Compute the B for GRE's equity. (b) What is the relationship between GRE's return and the market as implied by B? (c) Given the T-bill with a return at 1%, calculate the expected returns on GRE's equity. GRE Inc is a well-established IT company in the US. In the recent past the variance of its annual share return has been 25(%) while the S&P500 composite index has had an average annual return of 5% and a variance of return of 36(%). The returns on GRE Inc have a coefficient of correlation of 0.7 with the market index. Required: Compute the B for GRE's equity. (b) What is the relationship between GRE's return and the market as implied by B? (c) Given the T-bill with a return at 1%, calculate the expected returns on GRE's equity.

Answer rating: 100% (QA)

Variance of GRE returns Var G 25 Variance of Index ret... View the full answer