5. Suppose that the market can be described by the following three sources of svstematic risk. Th...
9. Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Risk Premium Industrial production (I) 7% Interest rates (R) 2 Consumer confidence (C) 5 The return on a particular stock is generated according to the following equation: r = 19% + 0.8I + 0.4R + 0.50C + e a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate...
Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Risk Premium Industrial production (I) 7 % Interest rates (R) 4 % Consumer confidence (C) 5 % The return on a particular stock is generated according to the following equation: r = 12% + 1.2I + 0.8R + 1.00C + e a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 8%. (Do...
Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Industrial production (1) Interest rates (R) Consumer confidence (C) The return on a particular stock is generated according to the following equation: r=19% +0.71 +0.4R+ 0.60C+ e 0-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 8%. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Equilibrium rate of...
Consider the following information: Beta Portfolio Risk- free Market Expected Return 6 % 11.4 9.4 20 a. Calculate the expected return of portfolio A with a beta of 20. (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 5....
Please answer Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply The APT is more general than the Capital Asset Pricing Model (CAPM) The APT maintains that the realized return on any stock depends on changes unique to the firm. The APT model maintains that the realized returns on stocks depend on unexpected changes in fundamental economic factors The APT identifies all relevant factors that affect the realized returns on stocks Imani,...
9. The Arbitrage Pricing Theory Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. The APT is more restrictive than the Capital Asset Pricing Model (CAPM). The APT assumes that all investors hold the market portfolio The APT does not identify the relevant factors. The APT does not restrict the number or nature of the factors relevant to the determination of a stock's return. Karine, an analyst at Graffiti Aviation (GA), models...
Suppose the yield on short-term government securities (perceived to be risk-free) is about 5%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 15.0%. According to the capital asset pricing model: a. What is the expected return on the market portfolio? (Round your answer to 1 decimal place.) Expected rate of return ſ b. What would be the expected return on a zero-beta stock? Expected rate of return % Suppose...
Expected Return, Varianoe & Standard Deviation Suppose your expectations of the stock market are shown as follows: Prob r(s) Boom 0.2 30% Normal 0.5 20% Recession 0.3 -20% (Expected Return(E(r)), variance(o2) and standard deviation (o) Compute the mean of the rate of return on stocks. Risk Premium & Capital Allocation Consider when you decide to invest in a risky portfolio P (with the expected return of 20% and standard deviation of 30 %) and a Treasury bill (The rate of...
12. Portfolio has beta=-0.5; its alpha is -2%, risk free rate is 5%; market expected return is 8%. Find market risk premium R_mt, expected return r_portfolio and excess return R_portfolio. Use formula R_portfolio =beta portfolio *R_market]+alpha+e_portfolio; Where for each security, R=r-r_free is excess return; Is such portfolio over-, under- or fairly priced? Assume, portfolio is well diversified. Which term (s) should be negligible? Follow the guideline below to take the steps using a well- diversified portfolio to build an arbitrage...
Consider the following information on a portfolio of three stocks: State of Probability of Stock A Stock B Stock C Economy State of Economy Rate of Return Rate of Return Rate of Return Boom .14 .11 .36 .51 Normal .51 .19 .21 .29 Bust .35 .20 − .20 − .39 a. If your portfolio is invested 44 percent each in A and B and 12 percent in C, what is the portfolio’s expected return, the variance, and the standard deviation?...
Post an Article
Post an Answer
Post a Question
with Answer
Self-promotion: Authors have the chance of a link back to their own personal blogs or social media profile pages.