You have estimated the returns of XYZ corporation and on the overall market for five years:

 

1) Estimate beta for this stock?

2) What is the expected return on XYZ corporation if you use the CAMP?

3) If XYZ corporation has a current debt/equaty ratio of 50%, what would its beta be if it increased its debt/equaty ratio till 200%?

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Year 1982 1983 1984 1985 1986 Rxyz 20% -10% 30% 10% 0% Rm 15% -5% 25% 15% -10% Year 1982 1983 1984 1985 1986 Rxyz 20% -10% 30% 10% 0% Rm 15% -5% 25% 15% -10%

Answer rating: 100% (QA)

1 To estimate the beta for this stock we can use the following formula Beta Covariance of the stocks ... View the full answer