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?
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- 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?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?APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1 = 0.7 and bi2 = 0.9, what is Crisp’s required return?
- 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?What is the expected risk-free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent?Calculate the required rate of return for an asset that has a beta of 1.53, given a risk-free rate of 3.6% and a market return of 9.2%. b. If investors have become more risk-averse due to recent geopolitical events, and the market return rises to 11.8%, what is the required rate of return for the same asset?
- Given an expected market risk premium of 12.0%, a beta of 0.75 for Benson Industries, and a risk-free rate of 4.0%, what is the expected return for Benson Industries?If the risk-free rate is 7 percent, the expected return on the market is 10 percent, and the expected return on Security J is 13 percent, what is the beta of Security J?A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent.The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. Compute and justify the expected rate of return would a security earn if it had a 0.45 correlation with the market portfolio and a standard deviation of 55 percent.
- What is the expected return for asset X if it has a beta of 1.5, the expected market return is 15 percent, and the expected risk-free rate is 5 percent?The risk-free rate of return is 6 per cent. The market rate of return is 12 per cent with a standard deviation of 8 per cent. If you desire to earn a rate of return of 10 per cent, in what proportion should you hold market portfolio and the risk-free assetBreckenridge, Inc., has a beta of 0.97. If the expected market return is 12.0 percent and the risk-free rate is 6.0 percent, what is the appropriate expected return of Breckenridge (using the CAPM)?