Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.46 and an alpha of -0.21% per month. Amonth later, the market is up by 5.1%, and United Futon is up by 6.1 %. What is Futon's abnormal rate of return? (A negative answershould be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimalplaces.)Rate of return(1.34)

Calculation of Abnormal Rate of Return:

Answered: Analysis of 60 monthly rates of return…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

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A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate, g, throughout time. The stock’s required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL?
Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.65 and an alpha of –0.40% per month. A month later, the market is up by 7%, and United Futon is up by 8%. What is Futon’s abnormal rate of return? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.53 and an alpha of –0.28% per month. A month later, the market is up by 5.8%, and United Futon is up by 6.8%. What is Futon’s abnormal rate of return?
The common stock of Manchester & Moore is expected to earn 14.8 percent in a recession, 8 percent in a normal economy, and lose 5.8 percent in a booming economy. The probability of a boom is 12 percent while the probability of a recession is 6 percent. What is the expected rate of return on this stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The rate of return on General Electric common stock over the coming year is normally distributed with an expected value of 15 percent and a standard deviation of 12 percent. Determine the probability of earning a negative rate of return.
Currently, a firm has an EPS of $3.75 and a benchmark PE of 16.61. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
. please with proper formula.You find a particular stock has an annual standard deviation of 55 percent. What is the standard deviation for a two-month period? O 23.10% O 24.50% O 22.45% O 21.05%
The current (time zero) price of one share of farell corporation's common stock is $25. The price is expected to increase by $5 over the coming year. The company is not expected to pay a dividend during the year. The standard deviation of the expected price change is $3. The distribution of the end of year possible prices is approximately normal. Determine the probability of earning a return greater than 30 percent over the coming year from your investment in farell common stock.
Stanton Company stock is trading for 50 in a two‑time period environment, so that each relevant time period is 6 months. The stock might increase by exactly 20% in just one period or perhaps in both periods. Of course, the stock might not increase in either period. If the stock price does not increase in a given period, it will decline by 16.67 percent in that particular period. One-year options with an exercise price equal to 60 are trading on this stock. The annual riskless rate of return equals 0. a. What is the value of a put in this environment? b. What is the probability (risk-neutral probability) implied in this framework that the Stanton Company stock price will exceed 40 when options expire?
Stock prices over 5 months are observed to be $110.00, $115.00, $98.00, $107.00, and $112.00. What is the annualized standard deviation of the continuously compounded returns? Only using a calculator.
Y shares have a monthly average return of 1% and a monthly return standard deviation of 6%. Returns are assumed to be normally distributed. Provide the following risk measures and show your working. Suppose there are 21 trading days in a month. Use 4-digit decimal places throughout your calculation. Calculate the stock's Value-at-Risk at the 95% level over a 1 day horizon. Calculate the stock's Value-at-Risk at the 95% level over 1 year horizon.
A company has a beta of 1.4, the T-bill rate is 2.09%, and the expected return on the market is 9.02%. What is its required rate of return? Do not round your intermediate calculations. Express as a percent rounded to two decimal places.

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