The risk-free rate and the expected market rate of return are 0.06 and 0.12 respectively. Using the CAPM model the expected rate of return of a security with a beta of 1.2 would be
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The risk-free rate and the expected market
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- 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?The risk-free rate and the expected market rate of return and 0.056 and 0.125. Using the CAPM model, the expected rate of return of a security, that you are interested in, has a beta of 1.25 would be equal to Calculate the expected rate of returnIf the market portfolio has a required return of 0.12 and a standard deviation of 0.40, and the riskfreerate is 0.04, what is the slope of the security market line?
- The beta of a risk-free security is _____ and the beta of the overall market is _____: a. 0; 1. b. 0; 0. c. 1; 0. d. 1; 1.Which of the following statements about the Security Market Line are correct? I. The intercept point is the market rate of return. II. The slope of the line is beta. III. An investor should accept any return located above the SML line. IV. A beta of 0.0 indicates the risk-free rate of returnSecurity A has an expected rate of return of 6%, a standard deviation ofreturns of 30%, a correlation coefficient with the market of 20.25, and abeta coefficient of 20.5. Security B has an expected return of 11%, a standard deviation of returns of 10%, a correlation with the market of 0.75, anda beta coefficient of 0.5. Which security is more risky? Why?
- The security market line has a slope equal to the a) Risk-free rate b) Market risk premium c) Beta coefficient d) Market rate of returnAssume that security returns are generated by the single-index model, Ri = alphai + BetaiRM + ei where Ri is the excess return for security i and RM is the market's excess return. The risk-free rate is 2%. Suppose also that there are three securities A, B, and C, characterized by the following data. Security Betai E(Ri) sigma(ei) A 1.4 15% 28% B 1.6 17% 14% C 1.8 19% 23% a. If simaM = 24%, calculate the variance of returns of securities A, B, and C (round to whole number). Variance Security A Security B Security C b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C (enter the variance answers as a whole number decimal and the mean as a whole number percentage)? Mean Variance Security A ?% Security B ?% Security C ?%According to CAPM, the expected rate of return of a portfolio with a beta of 1.0 and an alpha of 0 is:a. Between rM and rf .b. The risk-free rate, rf .c. β(rM − rf).d. The expected return on the market, rM.
- The risk-free rate is 3 percent, the expected return on the PSEi is 13 percent, and its standard deviation is 23 percent. XYZ co, has a standard deviation of 50 percent and a correlation of 65 with the market. Calculate XYZ beta and expected return then explain the role of a security’s beta in the calculation of expected returnsIf X-Co has a Beta of 1.6, and the risk-free rate is 4.5%, and the average market risk premium is 6%, what is X-Co’s estimated required return per the CAPM? (show calculations)Security A has an expected return of 7%, a standard deviation of returns of35%, a correlation coefficient with the market of 20.3, and a beta coefficientof 21.5. Security B has an expected return of 12%, a standard deviation ofreturns of 10%, a correlation with the market of 0.7, and a beta coefficient of1.0. Which security is riskier? Why?