You have the following data on (1) the average annual returns of the

1.  You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B.  Which of the possible answers best describes the historical betas for A and B?

Years     Market     Stock A     Stock B

   1        0.03        0.16        0.05

   2       -0.05        0.20        0.05

   3        0.01        0.18        0.05

   4       -0.10        0.25        0.05

   5        0.06        0.14        0.05

a. bA > 0; bB = 1.

b. bA > +1; bB = 0.

c. bA = 0; bB = -1.

d. bA < 0; bB = 0.

e. bA < -1; bB = 1.

 

2. Which of the following statements is CORRECT?

a. “Characteristic line” is another name for the Security Market Line.

b. The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry.

c. The slope of the characteristic line is the stock’s standard deviation.

d. The distance of the plot points from the characteristic line is a measure of the stock’s market risk.

e. The distance of the plot points from the characteristic line is a measure of the stock’s diversifiable risk.

 

 

3. Assume an economy in which there are three securities:  Stock A with rA = 10% and  A = 10%; Stock B with rB = 15% and  B = 20%; and a riskless asset with rRF = 7%.  Stocks A and B are uncorrelated (rAB = 0).     Which of the following statements is most CORRECT?

a. The expected return on the investor’s portfolio will probably have an expected return that is somewhat above 15% and a standard deviation (SD) of approximately 20%.

b. The expected return on the investor’s portfolio will probably have an expected return that is somewhat below 10% and a standard deviation (SD) of approximately 10%.

c. The expected return on the investor’s portfolio will probably have an expected return that is somewhat below 15% and a standard deviation (SD) that is between 10% and 20%.

d. The investor’s risk/return indifference curve will be tangent to the CML at a point where the expected return is in the range of 7% to 10%.

e. Since the two stocks have a zero correlation coefficient, the investor can form a riskless portfolio whose expected return is in the range of 10% to 15%.

 

4. Consider the following information and then calculate the required rate of return for the Scientific Investment Fund, which holds 4 stocks.  The market’s required rate of return is 15.0%, the risk-free rate is  7.0%, and the Fund’s assets are as follows:

                    

Stock         Investment         Beta

A           $  200,000         1.50

B              300,000        -0.50

C              500,000         1.25

D            1,000,000         0.75

 

a. 10.67%

b. 11.23%

c. 11.82%

d. 12.45%

e. 13.10%

 

 

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more