If an investment with a beta of 1.5 offers an expected return of 20%, should you proceed with the investment? Where will this investment plot in relation to the security market line? Assume that the government bond rate is 6, and the expected return on the market portfolio is 14%.
Q: Suppose you have $2,000 to invest. The market portfolio has an expected return of 10.5 percent and a…
A: Let the weight in Risk free Asset be A Therefore, weight in market portfolio be 1-A
Q: Suppose the risk-free rate is 5.1 percent and the market portfolio has an expected return of 11.8…
A: Standard deviation of market portfolio and portfolio Z is calculated. Then covariance and beta of…
Q: need help with all
A: Risk free rate, Rf = 4%CAPM = E(R) = Rf + Beta x (Rm - Rf) where Rm is the expected return from…
Q: Assume the riskless rate of interest is 2% per year, and the expected rate of return on the market…
A: The expected return is the profit margin or loss that an investment may anticipate by the investor.…
Q: Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either…
A: Given data; cash flow1 = $110,000 probability 1 = 0.5 cash flow 2 = $280,000 probability2 = 0.5 risk…
Q: Based on current dividend yields and expected capital gains, the expected rates or return on…
A: Hence, sharpe ratio of A is 5.71% and is calculated by dividing the difference of anticipated…
Q: If the risk free rate is 2 %, the expected return on the market portfolio is 12% and the beta of…
A: Financial statements are statements which states the business activities performed by the company .…
Q: The Treasury bill rate at the time of estimation is 15% with a beta of 2.0 and the expected return…
A: The Capital Asset Pricing Model (CAPM): A Capital Asset Pricing Model is the technique of…
Q: The Treasury bill rate is 4%, and the expected return on the market portfolio is 12%. According to…
A: Financial statements are statements which states the business activities performed by the company .…
Q: Consider the following two investment alternatives: First, a risky portfolio that pays a 15% rate of…
A: Given: Return Probability 15% 40% 5% 60%
Q: The Treasury bill rate is 6%, and the expected return on the market portfolio is 10%. According to…
A: Expected Return on Market = 10% Risk free Rate = 6%
Q: You have estimated a firm's beta value to be 1.2. The expected return of the market portfolio is 12%…
A: We require to calculate the required rate of return for the firm in this question. We can solve this…
Q: The market index return is 1.3% and its standard deviation is 17%. The risk free rate is 3%.…
A: Sharp Ratio = ( Return of Portfolio - Risk free rate)/ Portfolio Standard deviation…
Q: Suppose the rate of return on short-term government securitles (percelved to be risk-free) Is about…
A: According to CAPM model, Ke=Rf+beta ×Rm-Rf where, Rf = risk free return Rm= market return
Q: A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7…
A: A portfolio is a combination or group of financial instruments and securities that are held by an…
Q: CAPM: The Treasury bill rate is 5%, and the expected return on the market portfolio is 12%. On the…
A: Risk premium = Expected return on market portfolio - Treasury bill rate Risk premium on investment =…
Q: A project under consideration has an internal rate of return of 14% and a beta of 0.6. The risk-free…
A: Financial statements are statements which states the business activities performed by the company .…
Q: Security F has an expected return of 10 percent and a standard deviation of 43 percent per year.…
A: The expected return of the company is the return of security adjusted with the volatility with…
Q: Consider the following information: the risk-free rate is 2%, and the expected rate of return on the…
A: Risk free rate (Rf) = 2% Market portfolio return (Rm) = 10% Beta = 1.5 We need to find the required…
Q: e Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to the…
A: We need to use CAPM to calculate required rate of return. The equation Required rate of return =Risk…
Q: The Treasury bill rate is 4.9%, and the expected return on the market portfolio Is 11.1%. Use the…
A: According to the rule, we will answer the first three subparts, for the remaining subparts, kindly…
Q: A project with a beta of 1.50, risk-free rate 7%, and the return on the market portfol ually…
A: In this we need to find out the required rate by capital asset pricing model.
Q: Security F has an expected return of 10 percent and a standard deviation of 43 percent per year.…
A: Solution- (A)-The expected return of the portfolio is the sum of the weight of each asset timesthe…
Q: The Treasury bill rate is 3%, and the expected return on the market portfolio is 14%. According to…
A: Part (a): Calculation of risk premium on the market: Answer: Risk premium is 11%
Q: What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T?…
A: Return of Stock S = (0.25 * 30%) + ( 0.5 * 15% )+ (0.25 * -10%) = 7.5 + 7.5 - 2.5 = 12.5 Return of…
Q: A treasury bill pays a 6% rate of return. The market portfolio pays 15% with a probability of 20% or…
A: A treasury bill is issued by the government as short-term security. They have a maturity of less…
Q: You are going to invest $50,000 in a portfolio consisting of assets X, Y, and Z, as follows; What…
A: Expected return of the portfolio can be calculated by averaging the returns of assets in proportion…
Q: The Treasury bill rate is 6%, and the expected return on the market portfolio is 12%. According che…
A: Given information : Treasury bill rate = 6% Expected return on market portfolio = 12% And, CAPM…
Q: The Treasury bill rate is 6%, and the expected return on the market portfolio is 10%. According to…
A: Since you have asked a question with multiple parts, we will solve the first 3 parts for you. Please…
Q: The U.S. Treasury bill has a return of 4.75 percent while the S&P 500 is returning 12.8 percent.…
A: Jensen's alpha is also referred to as alpha that represents the average return on a portfolio or…
Q: Your Company's manager has a $40 million portfolio with a beta of 1.00. The risk-free rate is 4.25%,…
A:
Q: Conglomco has a beta of 0.32. If the market return is expected to be 12 percent and the risk-free…
A: Following details are given to us in the question : Beta (B) = 0.32 Market Return = 12% Risk free…
Q: A project under consideration has an internal rate of return of 17% and a beta of 0.5. The risk-free…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…
Q: The Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to…
A: (a) Risk premium on the market = Expected market return - risk free return = 14%…
Q: Security F has an expected return of 10 percent and a standard deviation of 43 percent per year.…
A: given, rf=10%σf=43%rg=15%σg=62%wf=0.3wg=0.7
Q: Currently the rate of return of the risk-free government bond is 3% while the expected rate of…
A: Capital Asset Pricing Model or CAPM is used to measure minimum return that an investor will expects…
Q: If the firm uses its current WACC of 12 percent to evaluate the projects, which project(s), if any,…
A: It is the discounted rate that has been calculated by the company on the basis of which present…
Q: A project under consideration has an internal rate of return of 14% and a beta of 0.6. The risk-free…
A: Financial statements are statements which states the business activities performed by the company .…
Q: . Capital Asset Pricing Model A. Suppose you invest $400,000 in Treasury Bills that have a yield to…
A:
Q: If the 10 year government bond rate is 2.78% and the long term return on the market as proxied by…
A: In the given question we require to calculate the expected returns for WBC and CBA using Capital…
Q: Suppose the rate of return on short-term government securities (perceived to be risk-free) is about…
A: In the given question we need to compute the Expected rate of return on the market portfolio in Part…
Q: Suppose the yield on short-term government securities (perceived to be risk-free) is about 4%.…
A: In the given question we require to compute the expected return on the market portfolio. This…
Q: The Treasury bill rate is 4%, and the expected return on the market portfolio is 14%. According to…
A: Dear Student as per Bartleby's answering guideline we can not answer more than three sub-parts. to…
Q: Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either…
A: Part (a): Answer: The present value of the portfolio is $118,421 Calculation of expected cash flows:…
If an investment with a beta of 1.5 offers an expected return of 20%, should you proceed with the investment? Where will this investment plot in relation to the security market line? Assume that the government bond rate is 6, and the expected return on the market portfolio is 14%.
Step by step
Solved in 2 steps
- What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. Do you expect the investment to be a good one for the coming year if betas for the two portfolio components are 0.6 and 1.3, respectively?The Treasury bill rate is 4.9%, and the expected return on the market portfolio is 11.1%. Use the capital asset pricing model. What is the risk premium on the market? (Enter your answer as a percent rounded to 1 decimal place.) What is the required return on an investment with a beta of 1.2? (Enter your answer as a percent rounded to 2 decimal places.) If an investment with a beta of 0.46 offers an expected return of 8.7%, does it have a positive NPV? If the market expects a return of 12.2% from stock X, what is its beta? (Round your answer to 2 decimal places.)Currently the rate of return of the risk-free government bond is 3% while the expected rate of return on the market is 11%. Using CAPM, calculate the rate of return required for A plc who has a beta of 0.8 and B plc who has a beta of 1.35. If you create a portfolio with 40% of funds in A plc and 60% in B what return would you expect?
- (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?Currently the rate of return of the risk-free government bond is 3% while the expected rate of return on the market is 11%. Using CAPM, calculate the rate of return required for A plc who has a beta of 0.8 and B plc who has a beta of 1.35. If you create a portfolio with 40% of funds in A plc and the remainder in B what return would you expect?The Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market?b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)c. If an investment with a beta of 0.6 offers an expected return of 8.4%, does it have a positive or negative NPV?d. If the market expects a return of 11.6% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
- The Treasury bill rate is 6%, and the expected return on the market portfolio is 10%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.8 offers an expected return of 9.0%, does it have a positive or negative NPV? d. If the market expects a return of 11.0% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)The treasury bill rate is 6%, and the expected return on the market portfolio is 10%. According to the capital asset pricing model: A. What is the risk premium on the market? B. What is the required return on an investment with a beta of 1.4? C. If an investment with a beta of 0.8 offers an expected return of 9.0% does it have positive or negative NPV? D. If the market expects a return of 11.0% from stock X, what is its beta?Assume the riskless rate of interest is 2% per year, and the expected rate of return on the market portfolio is 8% per year. According to the CAPM, what is the efficient way for an investor to achieve an expected rate of return of 5% per year? If the standard deviation of the rate of return on the market portfolio is 4%, what is the standard deviation of the portfolio producing the 5% expected return? • Plot the CML and locate the foregoing portfolios on the same graph. • Plot the SML and locate the foregoing portfolios on the same graph.
- Suppose you have $2,000 to invest. The market portfolio has an expected return of 10.5 percent and a standard deviation of 16 percent. The risk-free rate is 3.75 percent. How much should you invest in the risk-free asset if you wish to have a 15 percent return on the portfolio?Security F has an expected return of 10 percent and a standard deviation of 43 percent per year. Security G has an expected return of 15 percent and a standard deviation of 62 percent per year. Required: (a) What is the expected return on a portfolio composed of 30 percent of Security F and 70 percent of Security G? (b) If the correlation between the returns of Security F and Security G is .25, what is the standard deviation of the portfolio described in part (a)?CAPM: The Treasury bill rate is 5%, and the expected return on the market portfolio is 12%. On the basis of Capital Asset Pricing Model: What is the risk premium of the market? What is the risk premium of an investment with a beta of 1.5? What is the required return of an investment with a beta of 1.5? If an investment has a beta of .8 and offers an expected return of 11% (think of it as its IRR), does it have a positive NPV?