Question: QUESTION 2 An analysts expected return on two shares for particular market returns have been given as follow: Market Return Aggressive share Defensive share 6%

QUESTION 2

An analysts expected return on two shares for particular market returns have been given as follow:

Market Return

Aggressive share

Defensive share

6%

2%

8%

20

30

16
  1. What are the beta of the two shares?
  2. What is the expected return on each share if the market return is equally likely to be 6% or 20 %?
  3. If the risk-free rate is 7% and the market return is equally likely to be 6% or 20% what is the security market line?
  4. Using the results obtained in part c, use CAPM to find out the beta for the portfolio

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:

Market Retur 6% 20% 296 30% 8% 16% e following table gives an analysts expected return on two stocks for particular market returns: What are the betas of the two stocks? [2 marks] ii. What is the...

Q:

Consider the following table, which gives a security analysts expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return Aggressive Stock Defensive Stock...

Q:

Problem 7-12 (Algo) Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return Aggressive...

Q:

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 68 16 Aggressive Stock 2.18 25 Defensive Stock 3.64 10 a....

Q:

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 6% 16 Aggressive Stock 2.38 25 Defensive Stock 4.1% 14 a....

Q:

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 8% 20 Aggressive Stock 3.0% 31 Defensive Stock 4.8% 14 a....

Q:

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 7% 20 Aggressive Stock 3.7% 30 Defensive Stock 5.5% 14 a....

Q:

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns Market Return Aggressive Stock 8% 3.0% 20 31 Defensive Stock 4.8% 14 a....

Q:

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 8% 20 Aggressive Stock 3.0% 31 Defensive Stock 4.8% 14 a....

Q:

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns. Use this info for the next two questions. Defensive Stock D Market...

Q:

Baltimore Manufacturing had a Work in Process balance of $80,000 on January 1, 2018. The year end balance of Work in Process was $97,000 and the Cost of Goods Manufactured was $620,000. Determine the...

Q:

Is R an increasing or decreasing function of r? When an electric current passes through two resistors with resistance r and s, connected in parallel, the combined resistance, R. can be calculated...

Q:

Calculate the capitalization ratio given the following information: long-term debt = $200,000; shareholders' equity = $1,300,000

Q:

need help In the following exercise, you will use the Access Files located in the Files section of your Canvas shell. For this assignment I do not want a MS Access file but rather a snapshot of the...