Question

Consider the following table for the expected returns of the market and the expected returns of a stock according to the CAPM

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Beta of the Stock = % Change in Stock Return / % Change in Market Return

% Change in Stock Return = 6.8% - 5 / 5 = 0.36 OR 36%

% Change in Market Return = 3.6 - 3 / 3 = 0.20 o 20%

Beta = 36% / 20% = 1.8

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.

Add a comment
Know the answer?
Add Answer to:
Consider the following table for the expected returns of the market and the expected returns of...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

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
  • Question 14 1 pts Consider the following table for the expected returns of the market and...

    Question 14 1 pts Consider the following table for the expected returns of the market and the expected returns of a stock according to the CAPM: 3% 3.6% 5% 6.8% What is the beta of the stock?

  • Consider the following two scenarios for the economy and the expected returns in each scenario for...

    Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Scenario Market Aggressive Stock A Defensive Stock D Bust –6 % –12 % –4 % Boom 15 36 10 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c....

  • Consider the following two scenarios for the economy and the expected returns in each scenario for...

    Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Scenario Bust Boom Rate of Return Aggressive Defensive Market Stock A Stock D -12% -4% 15 -6% 36 10 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c. If the T-bill...

  • Consider the following two scenarios for the economy and the expected returns in each scenario for...

    Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Scenario Bust Boom Rate of Return Aggressive Defensive Market Stock A Stock D -8% -11% -6% 33 40 18 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c. If the T-bill...

  • Saved Consider the following two scenarios for the economy and the expected returns in each scenario...

    Saved Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Scenario Bust Boom Rate of Return Aggressive Defensive Market Stock A Stock D -8% -13% -6% 26 35 19 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c. If the...

  • Problem 12-14 Expected Returns Problem 12-14 Expected Returns (LO2) Consider the following two scenarios for the...

    Problem 12-14 Expected Returns Problem 12-14 Expected Returns (LO2) Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Aggressive Defensive Market Stock A Stock D -8% -115 -6% Scenario Bust -225 -6% Boom Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio...

  • Problem 18 Intro We know the following expected returns for stock A and the market portfolio,...

    Problem 18 Intro We know the following expected returns for stock A and the market portfolio, given different states of the economy: State (s) Recession Normal Expansion Probability E(ras) E(TM,s) | 0.2 -0.06 0.02 0.5 0.09 0.05 0.3 0.17 0.09 The risk-free rate is 0.02. Part 1 IB - Attempt 3/5 for 10 pts. Assuming the CAPM holds, what is the beta for stock A? 2+ decimals Submit

  • 2. Consider the following expected return on two stocks for two particular market returns: With probability...

    2. Consider the following expected return on two stocks for two particular market returns: With probability 1/2 the market return is equal to 4%, return of stock A is 1% and B is 6%. With probability 1/2 the market return is equal to 20%, return of stock A is 33% and B is 10%. (Hint: these are realizations and not expected values, you should calculate the expected returns using the given probabilities and returns) (a) What is the expected rate...

  • Consider the following expected return on two stocks for two particular market returns: With probability 1/2...

    Consider the following expected return on two stocks for two particular market returns: With probability 1/2 the market return is equal to 4%, return of stock A is 1% and B is 6%. With probability 1/2 the market return is equal to 20%, return of stock A is 33% and B is 10%. (Hint: these are realizations and not expected values, you should calculate the expected returns using the given probabilities and returns) (a) What is the expected rate of...

  • Consider the following returns of two stocks in conjunction with the market M Std. dev. of...

    Consider the following returns of two stocks in conjunction with the market M Std. dev. of stock1 Std. dev. of stock 2 Std. dev. of market Expected return on the market rM 1096 Corr. of stock 1 with the market piM Corr. of stock 2 with the market p2M 0.7 Risk free rate T1 2096 T2 3096 15% 0.4 . According to the CAPM, what should the expected return of stock 1 and stock 2 be? (Note: Your answer should...

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