There are three risky securities (stocks) in the market: Expected dividend Stock Price today (Po) next...

  

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There are three risky securities (stocks) in the market: Expected dividend Stock Price today (Po) next term (E[D1]) Expected price next term (E[P1]) File Preview A 50 1.5 54 B C 32 25 1.0 38 0.8 25 Risk-free rate is 7% and market return is 12%. The return variance-covariance matrix of these stocks and the market index (M) is as follows: A B C M A 0.300 B 0.240 0.250 C 0.360 0.100 0.160 M 0.072 0.045 0.117 0.090 A diagonal element of the matrix is variance of the associated asset return and an off-diagonal element is covariance of the two associated asset returns. Assume that CAPM is the correct model. Question 1 - CAPM (5 point) Calculate the equity beta for stock A,B and C. (Use 2 decimal points.) What is the "sum" of the equity beta for stock A, B and C? A. 1.2 B. 2.0 C. 2.6 D. 3.3 E. 4.0 Calculate the expected return for stock A, B, and C implied by CAPM. (Use 2 decimal points.) What is the "sum" of the expected return for stock A, B and C? File Preview Calculate the expected return for stock A, B, and C by using discount cash flow method. (Use 2 decimal points.) What is the "sum" of the expected return for stock A, B and C? Calculate the expected return for stock A, B, and C implied by CAPM. (Use 2 decimal points.) What is the "sum" of the expected return for stock A, B and C? There are three risky securities (stocks) in the market: Expected dividend Stock Price today (Po) next term (E[D1]) Expected price next term (E[P1]) File Preview A 50 1.5 54 B C 32 25 1.0 38 0.8 25 Risk-free rate is 7% and market return is 12%. The return variance-covariance matrix of these stocks and the market index (M) is as follows: A B C M A 0.300 B 0.240 0.250 C 0.360 0.100 0.160 M 0.072 0.045 0.117 0.090 A diagonal element of the matrix is variance of the associated asset return and an off-diagonal element is covariance of the two associated asset returns. Assume that CAPM is the correct model. Question 1 - CAPM (5 point) Calculate the equity beta for stock A,B and C. (Use 2 decimal points.) What is the "sum" of the equity beta for stock A, B and C? A. 1.2 B. 2.0 C. 2.6 D. 3.3 E. 4.0 Calculate the expected return for stock A, B, and C implied by CAPM. (Use 2 decimal points.) What is the "sum" of the expected return for stock A, B and C? File Preview Calculate the expected return for stock A, B, and C by using discount cash flow method. (Use 2 decimal points.) What is the "sum" of the expected return for stock A, B and C? Calculate the expected return for stock A, B, and C implied by CAPM. (Use 2 decimal points.) What is the "sum" of the expected return for stock A, B and C?