Answered: If beta of Asian Paints is 0.6, the…

If beta of Asian Paints is 0.6, the expected return from Asian Paints is 13 %, and the alpha of Asian Paints is 1%, return from market as per Single Index Model is a. 13 b. 12 c. 20 d. 14

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 1P: The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market...

See similar textbooks

Related questions

Q: Suppose that the PSE composite index will move from 3,500 to 4,266 and rate for T-bills is 5%. The…

A: The market return of the stock can be calculated by the changes in index. and this market return…

Q: Stock R has a beta of 1.8, Stock S has a beta of 0.65, the expected rate of return on an average…

A: Required rate of return = risk free rate +(beta * market risk premium)

Q: Historical nominal returns for a company have been 16% and -40%. The nominal returns for the market…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: If the market return is 10%, the expected return from SBI is 16 %, and the alpha of the SBI is 2%,…

A: Market return = 10% Expected return = 16% Alpha = 2%

Q: Stock R has a beta of 1.9, Stock S has a beta of 0.35, the expected rate of return on an average…

A: Expected Rate of return on average stock = Risk free Rate + beta * Market risk premium 9% = 7% + 1 *…

Q: Assume that stock market returns have the market index as a common factor, and that all stocks in…

A: a) Expected profit (in dollar) =[$1,000,000 *( 0.025+1.6*Rm)] - [$1,000,000 * (-0.025 +1.6*Rm)]

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: The beta coefficient factor is the degree of volatility present with the stock investment in…

Q: Consider an economy where Capital Asset Pricing Model holds. In this economy, stocks A and B have…

A: In this we have to use capital assets pricing formula.

Q: Monroe Mclntyre has estimated the expected return for Bruehl Industries to be 9.45%. He notes the…

A: The Capital Asset Pricing Model (CAPM) refers to the model which tells us how the financial markets…

Q: Assume that stock market returns have the market index as a common factor, and that all stocks in…

A: a) The investor shorts ten equally weighted negative alpha stocks and invests $1 million in ten…

Q: Consider the two (excess return) index-model regression results for stocks A and B. The risk-free…

A: Generally, investor invest in different stocks to reduce the risk. Each stock has its own measures.…

Q: A stock's returns have the following distribution: Demand for the Probability of this Rate of Return…

Q: A stock's returns have the following distribution: Demand for the Probability of This Rate of Return…

A: Stock’s expected return is the return which is expected to be generated from the project. This…

Q: The covariance between stock A and market return is 135. The standard deviation of market’s return…

A: according to the rule, because you have posted multiple questions, we will answer the first question…

Q: Company A has a beta of 0.70, while Company B's beta is 0.95. The required return on the stock…

A: A Beta = 0.70 B Beta = 0.95 Required return on market = 11% Risk free rate = 4.25%

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: Systematic risk refers to the risk of the entire segment of the industry or market.

Q: The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market…

A: Information Provided: Standard Deviation for Stock A = 40% Standard Deviation for market = 24%…

Q: Company XYZ has a CAPM beta of 1.5. The expected return on the market is 20% and the risk-free rate…

A: Expected return can be calculated by using CAPM equation given below Expected return =Risk free…

Q: A British company Afrox, has a standard deviation of 50% and a correlated of 0.65 with the market.…

A: Formulas: Beta = (Standard deviation of stock * Correlation with market) / Standard deviation of…

Q: The returns on share A follow the market model with coefficients aa = 0.01, ßa = 1.25. If at time t,…

A: Alpha term (a) = 0.01 Beta term (b) = 1.25 Market return (Rm) = 0.02 Actual return of A (Re) = 0.025…

Q: Consider the two (excess return) index-model regression results for stocks A and The risk-free…

A: William F. Sharpe, a Nobel Laureate, devised the Sharpe ratio, which is used to help investors…

Q: Expected return for the market, 12%; Standard deviation of market return, 21%; Risk-free rate, 8%;…

A: Formula to calculate Beta of stock is Beta = Correlation coefficient between Stock and the market*…

Q: Calculate each stock's required rate of return. Round your answers to two decimal places. rx = ry…

A: Introduction: Capital asset pricing model is the widely used financial model which is used in…

Q: Assume the expected return on the market is 14 percent and the risk-free rate is 4 percent. What is…

A: The risk premium is the difference between the expected market rate and the risk-free rate. It is…

Q: Consider the two (excess return) index model regression results for A and B: RA = 0.8% + 1RM…

A: Residual standard deviation is measured by using the firm specific risk.

Q: A company has a beta of 0.6, the T-bill rate is 4.3%, and the expected return on the market is…

A: The required rate of return can be calculated with the help of CAPM equation.

Q: Assume CAPM is a correct model. Stock A's required rate of return is 12% and Stock B's required rate…

A: Stock -A Required rate of return is 12% Beta 1.2 Stock -B Required rate of return is 12% Beta 1.2…

Q: The rate of return on T-bills is 3.25% and the expected return on the market is 9.50%. J&X, Inc. had…

A: The risk-free rate of return is the ideal rate of return on a risk-free investment. In principle,…

Q: Abnormal returns, if a stock has a(Alpha)=.004, b(Beta)=1.2, A. Using the market model (eq. 7.4),…

A: Beta tells us how many times the stock shall move upward or downward with the increase/decrease in…

Q: If benchmark Sharpe’s Ratio is 1.5, return of the market is 13% and, risk free rate is 4%, standard…

Q: which stock(s) would be attractive to a diversified investor?

A: Expected rate of return is the return that an investor may expect from the investment that may be…

Q: Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: A researcher has determined that a two-factor model is appropriate to determine the return on a…

A: Risk free rate (Rf) = 11% GNP market return (R1) = 13.5% GNP beta (B1) = 1.2 Interest rate return…

Q: Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is…

A: Because you have posted multiple questions, we will answer the first question only, for the…

Q: Assume that stock market returns have the market index as a common factor, and that all stocks in…

A: Part a: The total number of stocks is 20. To build a zero investment portfolio, 10 stocks are sold…

Q: Average Return and Standard Deviation

A: Average Return: Average return is the average of different rates at different period of times.…

Q: Historical nominal returns for Coca-Cola have been 8% and -20%. The nominal returns for the market…

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is…

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: In running a regression of the retunrs of stock XYZ against the returns on the market, the Std for…

A: In the given question we need to compute the expected return of stock XYZ:

Q: y where the risk-free interest rate is 19% and the expected return of the market is 25%, the beta…

A: A. The expected returns can be calculated as follows : Calculations for above :

Q: Assume that the short-term risk-free rate is 6%, the market index S&P500 is expected to pay returns…

A: Excel Spreadsheet:

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: The expected return is the return of the portfolio which is the sum of each potential return that is…

Q: Suppose that the index model for stocks A and Bis estimated from excess returns with the following…

A: Variance measures the spread of each number in the data set from the mean of the data set. The…

Q: Given an expected market risk premium of 12.0%, a beta of 0.75 for Benson Industries, and a…

A: The capital asset pricing model is the model of valuing the minimum required rate of return an…

Q: Required Rate of Return Stock R has a beta of 1.4, Stock S has a beta of 0.45, the expected rate of…

A: Beta is one of the measure of volatility or risk of the stock. More beta means more risk and less…

Concept explainers

Stock Market Indices

Stock indexes are used to compare the price fluctuations of a group of stocks of similar companies, which are combined based on a similar industry or a particular market capitalization limit or type of market. The price comparison is based on a pre-determined standard method or indicators. These stock indexes are usually considered a base for comparison of a particular stock, and the performance of that particular company can be easily determined.

Question

If beta of Asian Paints is 0.6, the expected return from Asian Paints is 13 %, and the alpha of Asian Paints is 1%, return from market as per Single Index Model is

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 20%. If the correlation between Stock A and the market is 0.70, then what is Stock A’s beta?
If the market return is 10%, the expected return from SBI is 16 %, and the alpha of the SBI is 2%, beta of SBI with market as per Sharpe's Single Index Model is a. 1.0 b. 0.75 c. 1.4 d. 1.25
Colin observed that the standard deviation of the return on the market index is estimated as 9.14%. If Target Corporation (TGT)’s standard deviation is 6.71% and its correlation of returns with the market index is 0.29, TGT’s beta is closest to
Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =-0.03+2.10RM+eHD R-squared =0.7 RML =0.06+1.60RM+eML R-squared =0.6 σM =0.15 where M is S&P/TSX Comp Index and RX is the excess return of stock X. What is the covariance and the correlation coefficient between HD and ML? For portfolio P with investment proportion of 0.4 in HD and 0.6 in ML, calculate the systematic risk, non-systematic risk, and total risk of P.
Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =-0.03+2.10RM+eHD R-squared =0.7 RML =0.06+1.60RM+eML R-squared =0.6 σM =0.15 where M is S&P/TSX Comp Index and RX is the excess return of stock X. For portfolio P with investment proportion of 0.4 in HD and 0.6 in ML, calculate the systematic risk, non-systematic risk, and total risk of P. xx
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 4.0% + 0.50RM + eA RB= -1.2% + 0.7RM + eB sigmaM= 17% ; R-squareA = 0.26 ; R-squareB= 0.18 Break down the variance of each stock to the systematic and firm-specific components (write in decimal form, rounded to 4 decimal places). Risk for A Risk for B Systematic Firm-specific
A company has a beta of 0.6, the T-bill rate is 4.3%, and the expected return on the market is 13.66%. What is its required rate of return? Do not round your intermediate calculations. Express as a percent rounded to two decimal places.
In 2021, the annualized standard deviation of Merck & Co., Inc. (MRK) was 8.92% versus 10.34% for the market. With an assumption that the correlation between MRK's return and the market return is 0.73, MRK’s beta is closest to A. 1.02. B. 0.89. C. 0.63. D. 0.37.
A British company Afrox, has a standard deviation of 50% and a correlated of 0.65 with the market. Given that the risk free rate is 3%, the market risk premium is 13%, and its standard deviation is 23%. Calculate Afrox’s Beta and expected return. 0.5 and 9.5% 1.4130 and 17.13% 1.4130 and 21.37% 2.17 and 24.74% None of the above
The risk-free return is 5%, Company x has a beta of 1.5 and an expected return of 20%.Calculate the risk premium for the share index over the risk-free rate assuming J is on theSecurity Market Line, along with calculating the market return.
Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =-0.03+2.10RM+eHD R-squared =0.7 RML =0.06+1.60RM+eML R-squared =0.6 σM =0.15 where M is S&P/TSX Comp Index and RX is the excess return of stock X. What is the standard deviation of each stock? (Hint: βi = (ρiM σi) / σM.)
The expected return on the Market Portfolio M is E(RM)=15%, the standard deviation is sM=25% and the risk-free rate is Rf=5%. a. Suppose that stock X has standard deviation sX=30%, and correlation with the market portfolio rXM=0.5. Compute bX and E(RX) (the beta and the expected return of stock X) according to the Market Model (ie: alpha equals zero under the Market Model). b. Suppose that stock Y has standard deviation sy=15%, and correlation with the market portfolio rYM=-0.1. Compute bY and E(RY) (the beta and the expected return of stock Y) according to the Market Model (ie: alpha equals zero under the Market Model). c. Compute the beta of a portfolio composed 65% of stock X and 35% of stock Y.