Question: Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain. From the CAPM,

Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain. From the CAPM, what is the expected return on such an asset? Is it possible that a security with a positive standard deviation could have an expected return from the CAPM that is less than the risk-free rate? If so, what would its beta be? Would anyone be willing to purchase such a stock? Discuss.

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!

Dillon Fishing Charters has collected the following data for the December 31 adjusting entries: a. The company received its electric bill on December 20 for $ 230 but will not pay it until January 5....

9. Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain. From the CAPM, what is the expected return on such an asset? Is...

8. Figure 17.2 illustrates that once the debt issued by a company becomes risky, issuing additional debt causes the expected return on debt to increase at an increasing rate. Suppose the company...

1. Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain. From the CAPM, what is the expected return on such an asset? Is...

Please show all steps! Thank you! Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain. From the CAPM, what is the...

Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain. From the CAPM, what is the expected return on such an asset? Is...

Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain

1. Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%. Company $1 Discount Store Everything $5 Forecast return 12% 11% Standard deviation of returns 8% 10% Beta...

Question 2 a) Data for company X and Y are given below. The T-bill rate is 3.5% and the market risk premium is 8% Company Company X Company Y Forecasted return 13% 12% Standard deviation of returns...

please answer part B Question 2 a) Data for company X and Y are given below. The T-bill rate is 3.5% and the market risk premium is 8%. Company Company X Company Y Forecasted return 13% 12% Standard...

Tree Seedlings has the following current-year purchases and sales for its only product. Units Acquired at Cost Units Sold at Retail 170 units @ $2 = $ 340 264 units@ $3 $ 792 220 units @ $4 880 72...

Halfway through your sales presentation your prospect stops you and says, "That sounds like a great deal and you certainly have a good product, but I'm not interested now; maybe later." What should...

Which of the following situations represent saving? Check all that apply. Your family takes out a mortgage and buys a new house. You borrow $ 1 , 0 0 0 from a bank to buy a car to use in your pizza...

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...