A security with a beta of 1.0 earned a return of 15%last year when the market portfolio earned a returnof only 9%. Begin your answer with Consistent orInconsistent followed by your explanation.

Beta is the measure of systematic risk which explain the movement of price of the asset with respect…

Answered: A security with a beta of 1.0 earned a…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2Q: Security A has an expected rate of return of 6%, a standard deviation of returns of 30%, a...

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Similar questions

You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
The following table reports the percentage of stocks in a portfolio for nine quarters: a. Construct a time series plot. What type of pattern exists in the data? b. Use trial and error to find a value of the exponential smoothing coefficient that results in a relatively small MSE. c. Using the exponential smoothing model you developed in part (b), what is the forecast of the percentage of stocks in a typical portfolio for the second quarter of year 3?
Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation coefficient with the market of −0.3, and a beta coefficient of −1.5. Security B has an expected return of 12%, a standard deviation of returns of 10%, a correlation with the market of 0.7, and a beta coefficient of 1.0. Which security is riskier? Why?
Security A has an expected rate of return of 6%, a standard deviation of returns of 30%, a correlation coefficient with the market of −0.25, and a beta coefficient of −0.5. Security B has an expected return of 11%, a standard deviation of returns of 10%, a correlation with the market of 0.75, and a beta coefficient of 0.5. Which security is more risky? Why?
During a particular year, the T-bill rate was 6%, the market return was 14%, and a portfolio manager with beta of .5 realized a return of 10%.a. Evaluate the manager based on the portfolio alpha.b. Reconsider your answer to part (a) in view of the Black-Jensen-Scholes finding that the security market line is too flat. Now how do you assess the manager’s performance?
During the past 5-year, the monthly average return and standard deviation of Netflix (NFLX) stock were 3.5% and 10%, respectively. For the same period, the monthly average return and standard deviation of Verizon (VZ) were 0.6% and 4.6%, respectively. The correlation between NFLX and VZ was -0.1. Assume that the monthly risk-free rate is 0.1%. ) What is the Sharpe ratio for NFLX? What is the Sharpe ratio for VZ? Show your calculation steps briefly and clearly. Find the minimum-variance portfolio (MVP), i.e., the weight of NFLX and VZ in the MVP. You do not need to show your calculation steps for this subquestion. Find the optimal risky portfolio P*, i.e., the weight of NFLX and VZ in P*. You do not need to show your calculation steps for this subquestion. Calculate the Sharpe ratio for the optimal risky portfolio P*. Verify that P* offers a higher Sharpe ratio than NFLX and VZ.
The risk-free rate is 3 percent, the expected return on the PSEi is 13 percent, and its standard deviation is 23 percent. XYZ co, has a standard deviation of 50 percent and a correlation of 65 with the market. Calculate XYZ beta and expected return then explain the role of a security’s beta in the calculation of expected returns
In running a regression of the retunrs of stock XYZ against the returns on the market, the Std for the returns of stock XYZ is 20% and that of the market returns is 15%. If the estimated beta is found to be 0.75 : If the market falls by 2%, what is the expected return of stock XYZ ?
Consider the following returns for a portfolio of stocks that replicates the S&P 500 index that has a current market value of £250,000: Time Day 1 Day 2 Day 3 Day 4 Day 5 Return (%) 0.1% 0.2% -0.15% 0.12% 0.08% Required Assuming mean returns of zero, calculate the daily VAR using the RiskMetrics approach and a 95% confidence interval Assuming that returns are independently and identically distributed, compute the weekly VAR and comment on the difference with the 1-day VAR
A portfolio returned 13% last year, with a beta equal to 1.5. The market return was 10%, and the risk-free rate was 4%. Did the person earn more or less than the required rate of return on your portfolio? (Use Jensen’s measure.)
Portfolio XYZ had a return last year of 14%. The risk-free rate of return was 3%. The market return was 10%. If Portfolio XYZ has a beta = 1.2. Portfolio XYZ had an alpha of _____. +2.6% -2.2% +4% +2.2%
Vega fund had return of 12%, a beta of 1.2, in a standard deviation of 25% last year t bills generated 2%. At the same time, the market portfolio generated return of 11% and the standard deviation of 20%. What is the information ratio of Vega fund ?

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A security with a beta of 1.0 earned a return of 15% last year when the market portfolio earned a return of only 9%. Begin your answer with Consistent or Inconsistent followed by your explanation.