Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock using Capital Asset Pricing Model (CAPM)?
Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock using Capital Asset Pricing Model (CAPM)?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 13P
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Question
Daniel have established an investment portfolio of two stocks A and B five years ago. Required:
- Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free
rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock usingCapital Asset Pricing Model (CAPM)? - Assume that Daniel bought 3,000 stock B in the portfolio for total investment of $12,000, now the market price of the stock is $15, the dividend paid for this stock is $2 each year. Calculate the total rate of return of this stock?
- Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 35% and stock B accounts for 65% of your portfolio?
-
A
B
Expected return
19.5%
12.5%
Standard Deviation of return
7%
2.5%
Correlation of coefficient (p)
0.45
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