The following table shows estimates of the risk of two well-known Canadian stocks: Standard Standard Deviation (%) R2 Beta Error of Beta Sun Life Financial 25.7 0.19 0.95 0.16 Loblaw 30.5 0.01 0.21 0.27 What proportion of each stock’s risk was market risk, and what proportion was specific risk? What is the variance of the returns for Sun Life Financial stock? What is the specific variance? What is the confidence interval on Loblaw's beta? If the CAPM is correct, what is the expected return on Sun Life? Assume a risk-free interest rate of 4% and an expected market return of 13%. Suppose that next year, the market provides a 18% return. Knowing this, what return would you expect from Sun Life?

The following table shows estimates of the risk of two well-known Canadian stocks: Standard Standard Deviation (%) R2 Beta Error of Beta Sun Life Financial 25.7 0.19 0.95 0.16 Loblaw 30.5 0.01 0.21 0.27 What proportion of each stock’s risk was market risk, and what proportion was specific risk? What is the variance of the returns for Sun Life Financial stock? What is the specific variance? What is the confidence interval on Loblaw's beta? If the CAPM is correct, what is the expected return on Sun Life? Assume a risk-free interest rate of 4% and an expected market return of 13%. Suppose that next year, the market provides a 18% return. Knowing this, what return would you expect from Sun Life?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 4P: An analyst gathered daily stock returns for Feburary 1 through March 31, calculated the Fama-French...

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