HomeworkLib
Question

2- define beta? Be sure to include information on beta benchmarking, carefully defining market risk and...

2- define beta? Be sure to include information on beta benchmarking, carefully defining market risk and the significance of beta above and below current benchmarking. include information on beta benchmarking, carefully defining market risk, and the significance of beta above and below current benchmarking.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Beta is a measure of volatility or market risk of company and its shows that how the value of stock is associated the broad market index (benchmark index). There are two types of risk, un-diversifiable risk or market risk and diversifiable risk. Market risk is inherent in market and cannot be reduced while diversifiable risk is specific to industry or company and can be reduced through diversification. Market risk is the risk arises due to fluctuation or volatility in the market. Beta, near to one indicates that the stock moves with the market and beta above the current benchmarking (market index) is higher than one and it means that stock is more volatile than market index. Higher beta is good for aggressive investment. Beta below the current benchmarking (market index) is lower than one and it means that stock is less volatile than market index. Lower beta is preferred by risk-averse investors.

0 0
Add a comment
Know the answer?
Add Answer to:
2- define beta? Be sure to include information on beta benchmarking, carefully defining market risk and...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • The market risk premium is 8.4% and the risk-free rate is 2.3%. The beta of the...

    The market risk premium is 8.4% and the risk-free rate is 2.3%. The beta of the stock is 1.22. What is the required return of the stock? Enter you answer as a percentage. Do not include a percent sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. Enter your response below. % Click "Verify" to proceed to the next part of the question

  • Consider the following information: Beta Portfolio Risk- free Market Expected Return 6 % 13.8 11.8 a....

    Consider the following information: Beta Portfolio Risk- free Market Expected Return 6 % 13.8 11.8 a. Calculate the expected return of portfolio A with a beta of 1.6. (Round your answer to 2 decimal places.) Expected return b. What is the alpha of portfolio A (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Alpha C. If the simple CAPM is valid state whether the above situation is possible? Yes No

  • 9. Given this information: • Beta: 1.6 • Market risk premium 8% • Risk free rate:...

    9. Given this information: • Beta: 1.6 • Market risk premium 8% • Risk free rate: 3% • Dividends expected to grow 4% per year • Last dividend: 2 EUR • Equity selling at 17.5 a) What is the expected cost of equity using the CAPM? b) What is the expected cost of equity using the dividend growth model? c) Is there any difference between them? And if risk free rate decrease by 1%?

  • Consider the following information: Portfolio Expected Return Beta Risk-free 10 % 0 Market 10.8 % 1.0...

    Consider the following information: Portfolio Expected Return Beta Risk-free 10 % 0 Market 10.8 % 1.0 A 8.8 & 0.6 a. Calculate the expected return of portfolio A with a beta of 0.6. (Round your answer to 2 decimal places.) b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) c. If the simple CAPM is valid, is the above situation possible? y/n

  • Consider the following information: Portfolio Expected Return Beta Risk-free 7 % 0 Market 12.8 1.0 A...

    Consider the following information: Portfolio Expected Return Beta Risk-free 7 % 0 Market 12.8 1.0 A 11.5 1.9 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.9. (Round your answer to 2 decimal places.) b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) c. If the simple CAPM is valid, is the situation above possible? Yes No

  • Chapter 9 1. The reward-to-systematic risk (beta) ratio is 7.7% and the risk-free rate is 4.2%....

    Chapter 9 1. The reward-to-systematic risk (beta) ratio is 7.7% and the risk-free rate is 4.2%. What is the expected return on a risky asset if the beta of that asset is .89? the security market line. 2. If a stock is overvalued, it will plot A. above B. on or above C. on D. on or below E. below 3. The stock of Healthy Eating, Inc., has a beta of.88. The risk-free rate is 3.8 percent and the market...

  • Suppose the stock beta is 0.4. If the current market risk premium is 8% and the...

    Suppose the stock beta is 0.4. If the current market risk premium is 8% and the risk-free rate is 2%, what is Jada Corp’s required return? 3.20% 4.40% 4.00% 5.20% None of these

  • Answer the following questions Suppose that beta for a given stock is the same as market beta. The risk-free rate is 2%....

    Answer the following questions Suppose that beta for a given stock is the same as market beta. The risk-free rate is 2%. What is the expected return for this stock if the expected market return is 10%? What is the expected return for this stock if the market risk premium is 10%?

  • Suppose Jada Corp’s stock beta is 1.4. If the current market risk premium is 8% and...

    Suppose Jada Corp’s stock beta is 1.4. If the current market risk premium is 8% and the risk-free rate is 2%, what is Jada Corp’s required return? 10.40% 11.20% 14.00% 13.20% None of these The expected return of the S&P 500 Index is 10%. According to stock analysts, Ingrid Corp stock has an expected return of 15%. You should buy this stock if you believe the following: You should buy the stock, regardless of the stock’s beta. You should never...

  • 13. Beta is a measure of a stock's: Systematic Risk Risk relative to the market Both...

    13. Beta is a measure of a stock's: Systematic Risk Risk relative to the market Both A and B None of the above The most volatile stock would have Beta. Higher than 1.0. Lower than 1.0. Very close to 0.0. Beta is not related to volatility. Discounted cash flow techniques used in valuing common stock are based on: future value analysis. present value analysis. The CAPM. the APT. c.

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT