A rational investor seeking to maximize return for a given level of risk would most likely choose to invest in: A) either company B) Koala LTD. C) Aardvark Industries
Q: The shares of hypothetical company limited has the following anticipated returns with associated…
A: Using excel
Q: The price of Oman Flour mills share went up from 485 baisa to 880 baisa in 2016, further went up to…
A: Return can be calculated by 2 means one is geometric return and athematic return
Q: A. Walmart has both more total risk and more systematic risk. B. Walmart has more total risk and…
A: The standard deviation is measured by total risk hence, Intel stock has more standard deviation…
Q: Following information is given from the books of Al Hamid Investment Services. The expected market…
A: According to CAPM expected return can be calculated from risk free rate and market risk premium.
Q: Qarshi Industries is a very well-profiled Company in financial markets of Pakistan. The company is…
A: Since more than three parts are asked at a time the answer for first three sub-parts are only…
Q: Greg Noronha has been told the expected return on Merchants Bank is 8.80%, He knows the risk-free…
A: Fairly Valued - If a security's market price equals its true value, it is said to be fairly valued.…
Q: Suppose you have predicted the following returns for stocks C (Your Company) and T (Your Competitor)…
A: Expected return is a measure of probable returns that shows the anticipated return of an investment…
Q: Plaid Pants, Inc. common stock has a beta of 0.90, while Acme Dynamite Company common stock has a…
A: The question is multiple choice question.Plaid Pants, Inc. common stock has a beta of 0.90, while…
Q: An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm's…
A: Hi, since you have posted a question with multiple sub-parts, we will answer the first 3 as per…
Q: The risk-free rate of interest is 2.1% and the market return is 9%. Howard Corporation has a beta of…
A: Risk free rate (Rf) = 0.021 Market return (Rm) = 0.09 Beta (b) = 1.75 Required return = ?
Q: K.J. Lee, CFA, an analyst with Water's Edge Securities, estimates the market risk premium is 6.80%…
A: A model that represents the relationship of the required return and beta of a particular asset is…
Q: Cooley Computer Repair and Service Company's stock has a beta of 1.28, the risk-free rate is 2.25%,…
A: According to capm approach required return is equal to risk free rate plus beta times market risk…
Q: Assuming a risk-free rate of 8 percent and a market return of 12 percent, would it be wise for…
A: The fundamental rate of return is calculated by using the CAPM approach. In this approach, the…
Q: A company Rajesh Ltd has got returns of 12%, 15%, 11%, 6% and 9% respectively for first 5 years and…
A: Here,
Q: Taggart Inc.'s stock has a 50% chance of producing a 36% return, a 30% chance of producing a 10%…
A: Expected rate of return = Sum of probability * Returns
Q: Please help me with 11-7 ??♀️
A: Required rate of return E( R ) can be calculated using Capital Asset Pricing Model (CAPM) as below:
Q: You are reviewing two investment opportunities: the shares of company A and company B. Company A has…
A: Risk refers to variability of return and is measured by the standard deviation. The total risk of a…
Q: Given the following information.is it possible to infer anything about the standard deviation of an…
A: The Capital Asset Pricing Model (CAPM) defines the link between systematic risk and projected return…
Q: return
A: Formula to calculate the expected return is: E(r) = Sum(Return*Probability) Formula to calculate the…
Q: Consider the following information given to > answer the series of questions below to determine the…
A: Solution:- We know, expected rate of return in case of data (ie. Which involves probability) is the…
Q: The following data have been developed for the Donovan Company: Probability of State of Nature State…
A: (a) State Probability Market Return, Rm RmxPi Return for the Firm, Rj RjxPi 1 0.10 -0.15 -0.015…
Q: Kaskin, Inc., stock has a beta of 1.2 and Quinn, Inc., stock has a beta of .6. Which of the…
A: According to CAPM, the expected rate f return is the sum of the risk free rate and the risk premium…
Q: tock of Devas Ltd has Risk-free rate of 8 percent, Beta of 0.7, Market return of 15 percent and…
A: The question can be answered by determining the expected return for the stock using the capital…
Q: which stock(s) would be attractive to a diversified investor?
A: Expected rate of return is the return that an investor may expect from the investment that may be…
Q: Here are some historical data on the risk characteristics of Ford and Harley Davidson. Harley…
A: Since you have asked a question with five sub parts, I will address the first three sub parts.…
Q: A researcher has determined that a two-factor model is appropriate to determine the return on a…
A: Risk free rate (Rf) = 11% GNP market return (R1) = 13.5% GNP beta (B1) = 1.2 Interest rate return…
Q: The estimated factor sensitivities of Alpha PLC to Fama-French factors and the risk premia…
A: Required Return = Risk Free rate + (Factor Sensitivity*Market Risk Premium) +(Factor…
Q: Distributor Company A wants to determine the required rate of return on a stock portfolio with a…
A: Capital Asset Pricing Model (CAPM): CAPM is the method of calculating the expected return on…
Q: Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an…
A: Risk can be compared on the basis of coefficient of variation. Higher the coefficient of variation,…
Q: Below is a table of probabilities and expected returns for 2 securities under 3 possible scenarios:…
A: Expected rate of return is the profit or loss on the investor that is assumed to be anticipated by…
Q: Suppose that your estimates of the possible one-year returns from investing in the common stock of…
A: A statistical measure that represents the variation in the return on the stock is term as the…
Q: Fisher Co.'s stock has a beta of 1.40, the risk-free rate is 4.25%, and the market risk premium is…
A: Required rate of return is defined as the minimum return to the investor, where he will going to…
Q: ZR Corporation’s stock has a beta coefficient equal to 1.8 and a required rate of return equal to 16…
A: Beta =1.8 Required return =16% Market return =10%
Q: Dothan Inc.'s stock has a 25% chance of producing a 16% return, a 50% chance of producing a 12%…
A: Formula: Expected return =∑Chance ×return
Q: Average Return and Standard Deviation
A: Average Return: Average return is the average of different rates at different period of times.…
Q: How appropriate is the sharpe ratio for these assets? When would you use the sharpe ratio?
A: Sharpe Ratio Return on portfolio-Risk free rateStd deviation NOTE: Since the risk-free rate is not…
Q: The stock of a given corporation has a 25% chance of producing a 16% return, a 50% chance of…
A:
Q: Consider the following information regarding a new investment that a company intends…
A: Each investment has different risk level which is based upon the market of external situations.…
Q: Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco…
A: In this question coefficient of variation should be solved in order to analyse the risk to return…
Q: ants, Inc. common stock has a beta of 0.90, while Acme Dynamite Company common stock has a beta of…
A: The given problem relates to Capital asset pricing model. As per Capital asset pricing model,…
Q: Unthank Corp. has a volatility of 15% and a correlation with the market portfolio of 0.5. If the…
A: The expected return of the stock can be calculated with the help of CAPM equation.
Q: Given the following information,what is the cost of equity capital for JJ&Co Pty Ltd? JJ&Co…
A: Risk free rate = 2% Market return = 7.50% Correlation between JJ&Co and market = 0.50 Market…
Q: Solve the following questions If the expected return on a stock is 10 per cent. Risk free rate of…
A: We need to use CAPM equation to solve these problems. The equation is Expected return =Risk free…
Q: A stock’s return has the following distribution: Demand for the company’s products…
A: Return and risk are used by the investor to determine the performance of an investment.
Q: Here are some historical data on the risk characteristics of Ford and Harley Davidson. Ford…
A: Given, sigma(F) = 30.9% sigma(HD) = 16.9% Beta(F) = 1.26 Beta(HD) = 0.69 sigma(market) = 12%…
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?The expected rate of return for the stock of Cornhusker Enterprises is 20 percent, with a standard deviation of 15 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 9 percent. a. Which stock would you consider to be riskier? Why? b. If you knew that the beta coefficient of Cornhusker stock is 1.5 and the beta of Mustang is 0.9, how would your answer to Part a change?Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco Corporation. Square Corporation offers investors an expected rate of return equal to 39%, with a standard deviation of 20%. Square offers a higher expected return than Beximco Corporation (the expected rate of return equals 31%, and the standard deviation equals 18%), but it is also riskier. The variance for Square Corporation is 400, and Bexlmco Corporation is 324. Concerning both risk and return, which corporation has lower risk per unit of return, and which investment would be the better investment? Why? Show calculation and explain with necessary numerical data.
- In an economy where the risk-free interest rate is 19% and the expected return of the market is 25%, the beta coefficients of A, B, C and D stocks and the expected returns announced by the companies are as follows. According to the Financial (Capital) Assets Pricing Model c) Calculate the expected return rates of the shares.d) Determine which stocks can be invested by comparing the expected return announced by the company with the expected return you calculated.The stock of a given corporation has a 25% chance of producing a 16% return, a 50% chance of producing a 12% return, and a 25% chance of producing a -18% return. What is the firms expected rate of return and standard deviation?What is the expected rate of return on R. Halsey Inc. stock if it has a correlation coefficient equal to 0.48 with the market portfolio and a standard deviation of 0.25? The risk free rate is 3% and the return on the market is 12%. Assume CAPM holds and the risk free and market combined portfolio has a standard deviation of 14% and an expected return of 8 %
- Assuming a risk-free rate of 8 percent and a market return of 12 percent, would it be wise for investors to acquire an asset with a Beta of 1.5 and a rate of return of 14 percent given the facts above?(a) The risk premium on the market portfolio is estimated at 8 % with a standard deviation of 22 %. What is the risk premium on a portfolio invested 25 % in AELZ with a beta of 1.15 and 75 % in BAT with a beta of 1.25? (b) The return on the market is expected to be 14 %, a stock has a beta of 12, and the T-bill rate is 6 %. What expected rate of return would the SML predict? (c) A company is considering a new water bottling plant. Business plan forecasts an internal rate of return of 14 % on the investment. The beta of similar projects is 1.3. the risk free rate is 4 % and the market risk premium is estimated at 8 %. What is the hurdle for the project? What does this mean for the project: should it or should it not be undertaken?Suppose that, next year, you expect Intel’s stock to have a standard deviation of 30% and a beta of 1.2, and Walmart’s stock to have a standard deviation of 21% and a beta of 1.6. Based on these estimates, which stock carries more total risk? Which has more systematic risk? A. Walmart has both more total risk and more systematic risk. B. Walmart has more total risk and Intel has more systematic risk. C. Intel has more total risk and Walmart has more systematic risk. D. Intel has both more total risk and more systematic risk.
- Here are some historical data on the risk characteristics of Ford and Harley Davidson. Ford Harley Davidson β (beta) 1.26 0.69 Yearly standard deviation of return (%) 30.9 16.9 Assume the standard deviation of the return on the market was 12.0%. a. The correlation coefficient of Ford’s return versus Harley Davidson is 0.27. What is the standard deviation of a portfolio invested half in each share? b. What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills? c. What is the standard deviation if the portfolio is split evenly between Ford and Harley Davidson and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker? d-1. What is the approximate standard deviation of a portfolio composed of 100 stocks with betas of 1.26 like Ford? d-2. What is the approximate standard deviation of a portfolio composed of…Landon Stevens is evaluating the expected performance of two common stocks, Furhman Labs, Inc., and Garten Testing, Inc. The risk-free rate is 4 percent, the expected return on the market is 11.5 percent, and the betas of the two stocks are 1.2 and .9, respectively. Landon’s own forecasts of the returns on the two stocks are 13.75 percent for Furhman Labs and 10.50 percent for Garten. Calculate the required return for each stock. Is each stock undervalued, fairly valued, or overvalued?Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 12 percent and standard deviation of 25 percent. The average return and standard deviation of Idol Staff are 15% and 35%; and of Poker-R-Us are 9 percent and 20 percent. Before solving this problem, calculate the coefficient of variation.