Question: Suppose that you use the three average returns per annum calculated in above as the estimates of the expected returns for the two stocks and

Suppose that you use the three average returns per annum calculated in above as the estimates of the expected returns for the two stocks and market portfolio, respectively. Suppose that the risk-free rate is 0.8% per annum.

Plot a risk-return graph with beta on the x-axis and returns on the y-axis, which shows the Security Market Line, the market portfolio, and the actual returns of the two stocks.

Determine the fair expected returns for the two stocks according to CAPM

Discuss your findings

Average Stndrd Dev 3.688823529 1.143595375 6.627941176 0.976465051 8203.67500000 1824.601967

Step by Step Solution

★★★★★

3.44 Rating (160 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The Security Market Line SML is a graphical representation of the Capital Asset Pricing Model CAPM I... View full answer

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 Physics Questions!

Q5 (1pt) A bacterial cell has a solute concentration of 0.78%. Which of the following levels of solute concentration would the cell prefer to have as an external environment? a. a 0.90% solution of...

The Swiss risk free rate is 7.15%. If the Swiss national market return has a mean of 11% and a standard deviation was 24.4%, what is the ex-post return/risk performance of the market?

Suppose beta is 1.2, risk free rate is 1%, market risk premium is 4%, before tax cost of debt is 30%, tax rate is 20%, and the firm's debt to equity is 70%, what is WACC?

Average 3.688823529 6.627941176 8203.67500000 Stndrd Dev 1.143595375 0.976465051 1824.601967 Suppose that you use the three average returns per annum calculated in above as the estimates of the...

SCL Price SAN Price NZX50 Index Average Return 3.680147059 6.627941176 8203.669118 Standard Deviation 1.135566058 0.976465051 1824.60109 Suppose that you use the three average returns per annum...

Suppose that you use the three average returns per annum calculated in Part (a) as the estimates of the expected returns for the two stocks and market portfolio, respectively. Suppose that the...

Hi, i am stuck on my assignment was wondering if i can get any guidance, Part B: Security Market Line (10 marks) Suppose that you use the three average returns per annum calculated in Part (a) as the...

'part a)' refers to the table. Those are the calculated average returns. SCL Price SAN Price NZX50 Index Average Return 3.680147059 6.627941176 8203.669118 Standard Deviation 1.135566058 0.976465051...

Questions were written in the word file named questions, and the question related powerpoint slides were named as slides. Thanks in advance. 1) The common stock of Marielle Machinery will generate...

You are working as an investment analyst in the research department of IPA. Investments. The head of the research department has provided you with monthly historical data on the stocks of Scales...

A taxpayer wants to invest the maximum allowed in his retirement account. He has come to you for advice as to whether he should contribute to a traditional deductible IRA or to a Roth IRA account....

If a change is a Pareto improvement, then A. We also achieve Pareto efficiency. B. It also passes the cost minus benefit test. C. The distributional effect is likely to be regressive. D. Consumer...

Question 2 2 of 1 0 0 . Adam filed his 2 0 2 2 return and paid his balance due on March 2 1 , 2 0 2 3 . Under ordinary circumstances, what April 1 5 , 2 0 2 5 . October 1 5 , 2 0 2 5 . April 1 5 , 2...

SVM Dataset used: Heart Disease (not in sklearn) You are asked to implement the SVM classifier for the heart disease dataset. All you need to do is: See the article at URL:...

PLEASE IMPLEMENT IT IN PYTHON, THANK YOU 8. Implement the (direct) power method with the stopping criterion: (k) (k) (5) You will have to keep the q(k) in the current iteration and in the previous...

For the journal entry part write what this game does in a word document and send describing what the codes do. For the actual code send it in a way that it can be run by copy pasting into python...

Find out if the discrete-time system described by the I/O relationship y[n ]=x [-n ] for the input signal. x[n]= 2n, -2<=n<=2 is a) Static or dynamic b) Causal or non-causal c) Linear or not...

A report concluded that the 33% of 1057 youth they surveyed who responded that they plan to start their own business was the highest in the region. They conducted a variety of face to face and phone...

Non-reporting entities examples and key characteristic features Sole trader Partnership Social club / Unincorporated entity Who owns the entity? Who pays the income tax? Do the owners have limited...

Markoy Manufacturng recently spent $15 million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment will have a useful life of five years, and its...

The next problems use the following simplied from of the McEliece Cryptosystem. All parties agree on a family of error correcting codes given by generator matrices with a good decoding algorithm. (a)...

We have studied the linear time selection algorithm applied on n elements. Assume that all n elements are different. In the algorithm we have studied, we used group size of 5 . We proved that the...

In most Western democracies, it is settled law that governments cannot simply confiscate land for public purposes. Such confiscation is labeled a taking and, even when the government has compelling...

Markov Manufacturing recently spent S19.9 million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment wll have a useful life of five years, and its...

Part 1 and 2 please (see attached)!! Note: For Part 2, you can install the data analysis tool pack under Excel Options, Add-Ins, AnalysisToolPak. It's the same place that has the Solver Add-in....