Swift Ltd shares have provided 13% actual return, while Steady Ltd shares have provided 15% actual...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Swift Ltd shares have provided 13% actual return, while Steady Ltd shares have provided 15% actual return. The beta of Swift Ltd shares is 1.1 and the beta of Steady Ltd shares is 1.6. If the market return is 12% and the risk-free rate is 6%, calculate the alphas of both shares. (HINT: The alpha is the measure of the outperformance or underperformance of the stock's actual return compared to the expected return under CAPM.) Dolly identified that currently the T-bill rate (risk-free rate) is 2% pa, the standard deviation of the market is 18% and it is expected to remain the same over next year. If the return on the market index is expected to be 10% over the coming year (show all answers correct to 2 decimal places): a. Calculate the degree of risk aversion (A) for Dolly in the market index. b. What would the standard deviation (expressed as a percentage) of the market be in the coming year if the degree of risk aversion in the market index were 2? Swift Ltd shares have provided 13% actual return, while Steady Ltd shares have provided 15% actual return. The beta of Swift Ltd shares is 1.1 and the beta of Steady Ltd shares is 1.6. If the market return is 12% and the risk-free rate is 6%, calculate the alphas of both shares. (HINT: The alpha is the measure of the outperformance or underperformance of the stock's actual return compared to the expected return under CAPM.) Dolly identified that currently the T-bill rate (risk-free rate) is 2% pa, the standard deviation of the market is 18% and it is expected to remain the same over next year. If the return on the market index is expected to be 10% over the coming year (show all answers correct to 2 decimal places): a. Calculate the degree of risk aversion (A) for Dolly in the market index. b. What would the standard deviation (expressed as a percentage) of the market be in the coming year if the degree of risk aversion in the market index were 2?
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
d is incorrect, For matched pairs, the mean value d overbar is the mean value of the differences d for the paired sample data between the first and second values in the pair
-
Consider the following information: Rate of Return if State Occurs State of Economy Boom :57 Bust of Economy .66 .34 Probability of State Stock A .09 .13 Stock B Stock C .03 .19 .24 -.04 a. What is...
-
2022 Full Year Results Strong sales growth and continued progress against strategy Underlying performance GAAP measures (unaudited) 2022 vs 2021 2022 vs 2021 Full Year Underlying sales growth (USG)...
-
Match the cooking or preparation method to the relevant equipment. EQUIPMENT METHOD Food processor with a grater attachment or box grater Baking Range, pot or deep fryer, spatula or tongs Boiling...
-
Refer to Exercise 11.88 and determine and interpret a 98% confidence interval for the difference between the prostate cancer rates of men who have had a vasectomy and those who have not. In exercise...
-
If the coefficient of static friction between a table and a uniform massive rope is x, what fraction of the rope can hang over the edge of the table without the rope sliding?
-
Why do economists disagree?
-
A manufacturer of chocolate candies uses machines to package candies as they move along a filling line. Although the packages are labeled as 8 ounces, the company wants the pack-ages to contain a...
-
Consider the problem of estimating a random variable x from a sequence of observations yn = x vn, n = 1, 2, ..., using the LMMSE estimator. Assume that v1, v2, ... are i.i.d. with zero mean and...
-
1. Store the words in a character array. 2. Sort the array 3. Print the sorted array for the user to see what words are available. 4. Then prompt the user for a word to find in the array (Hint:...
-
A metallic sphere of diameter 5 cm is initially at a uniform temperature of 300oC. Suddenly the metal sphere is immersed in a fluid at 30oC. The convective heat transfer coefficient between the...
-
Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $100 per unit. Variable expenses are $70 per stove, and fixed expenses associated with...
-
Chadwick Enterprises, Incorporated, operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to...
-
3.4-1. Newton's system. Let where (q v) > 0. J x = x2, x2 = U, = 1/2 (x + 2vx1x2 + qx + u) dt, (la) (1b) (2)
-
Smithson Electric provides residential and business electric repair services. While direct labor and materials costs are traced to individual customers, administrative labor and transportation costs...
-
A tank is falling from a plane. They use the main gun to fly the tank as it is falling and to slow it down before it hits the lake. The tank has a weight of 60 tons (M=54,000 kg), fires shells with a...
-
What is removed during each of the three stages of wastewater treatment: primary, secondary, and tertiary? During which state would you expect items to be recovered that were accidentally flushed,...
-
Matson Company manufactures automobile floor mats. It currently has 2 product lines, the Standard and the Deluxe. Matson has a total of \($26,040\) in overhead. It currently used a traditional cost...
-
Refer to the information given in E4-9 regarding Matson Company. Suppose that Matson has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled...
-
Refer to your solutions obtained in E4-9 and E4-10. Required: 1. Discuss the costs and benefits to Matson of moving from a traditional costing system to an ABC system. 2. Compare the results of each...
Study smarter with the SolutionInn App