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BEAM047-Exam Paper_BEAM047R-AUG22 (1).pdf - Adobe Acrobat Reader DC (64-bit) File Edit View Sign Window Help Home Tools BEAM047-Exam_Pa... x 8.26 x 11.69 in 26°C Sunny / 4 200% Q 0 Sign In Security Z has a price of $50 and a beta of 2. The risk-free rate is 5% and the market risk premium is 10%. a) According to the CAPM, what return do investors expect on the security? (3 marks) b) Investors expect the stock to pay dividends of $4 per share next year. At what price do investors expect the stock to trade next year? (3 marks) c) Assume instead that investors expect no dividend and the next year's price to be 60. Would you invest in shares of B? Why/why not? (6 marks) d) What is the efficient frontier of risky assets? How does it change when more stocks are included in a portfolio? Explain the reason for the change. (13 marks) e) Consider the following linear regression model: (Ri-R)-ai+Bi(Rm-Rf)+εi Explain what do di, ẞi and measure respectively. (9 marks) Search 'Replace Page' Export PDF ✪ Adobe Export PDF Convert PDF Files to Word or Excel Online Select PDF File BEAM047-Ex...22 (1).pdf x Convert to Microsoft Word (*.docx) Document Language: English (U.S.) Change Convert Edit PDF Create PDF Comment Combine Files Organize Pages ▾ De Comproce. DDC Convert, edit and e-sign PDF forms & agreements Free 7-Day Trial 16:16 12/08/2022 BEAM047-Exam Paper_BEAM047R-AUG22 (1).pdf - Adobe Acrobat Reader DC (64-bit) File Edit View Sign Window Help Home Tools BEAM047-Exam_Pa... x 8.26 x 11.69 in 26°C Sunny / 4 200% Q 0 Sign In Security Z has a price of $50 and a beta of 2. The risk-free rate is 5% and the market risk premium is 10%. a) According to the CAPM, what return do investors expect on the security? (3 marks) b) Investors expect the stock to pay dividends of $4 per share next year. At what price do investors expect the stock to trade next year? (3 marks) c) Assume instead that investors expect no dividend and the next year's price to be 60. Would you invest in shares of B? Why/why not? (6 marks) d) What is the efficient frontier of risky assets? How does it change when more stocks are included in a portfolio? Explain the reason for the change. (13 marks) e) Consider the following linear regression model: (Ri-R)-ai+Bi(Rm-Rf)+εi Explain what do di, ẞi and measure respectively. (9 marks) Search 'Replace Page' Export PDF ✪ Adobe Export PDF Convert PDF Files to Word or Excel Online Select PDF File BEAM047-Ex...22 (1).pdf x Convert to Microsoft Word (*.docx) Document Language: English (U.S.) Change Convert Edit PDF Create PDF Comment Combine Files Organize Pages ▾ De Comproce. DDC Convert, edit and e-sign PDF forms & agreements Free 7-Day Trial 16:16 12/08/2022
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a According to the CAPM the expected return on Security Z is Rf Rm Rf 5 210 5 20 25 b Given that inv... View the full answer
Related Book For
Operations Management Creating Value Along the Supply Chain
ISBN: 978-1118301173
1st Canadian Edition
Authors: Roberta S. Russell, Bernard W. Taylor, Ignacio Castillo, Navneet Vidyarthi
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