What is a characteristic line? How is this line usedto estimate a stock’s beta coefficient? Write outand explain the formula that relates total risk,market risk, and diversifiable risk

Q: what is the return of stock a what is the return of stockb what is the standard deviation on stock…

A: Given: tate Probability(P) Return A Return B Poor 40% -0.08 -0.15 Normal 35% 0.19 0.14 Good…

Q: Briefly explain what the Beta of a stock means. What values can it take and what do these imply?…

A: Beta is a measure of a stock's volatility in relation to the overall market. If a stock moves less…

Q: If investors’ aversion to risk increased, would the risk premium on a high-beta stockincrease by…

A: Beta could be a degree of the volatility of a stock compared with the general market. The market,…

Q: What are the two components of most stocks’ expected total return?

A: Expected total return refers to the full return of an investment over a certain period of time.

Q: If a stock has a beta of 0.8, what doesthat imply about its risk relative to the market?

A: Beta: Beta can be defined as the measure of instability of a separate stock relative to the…

Q: How do you calculate the Treynor ratio for the AMD stock?

A: Treynor ratio is referred to as the portfolio performance, which used to measure regarding the…

Q: What does the meaning of maximum and minimum price in the stock performance graph? how to know which…

A: Succinctly summarized, a stock chart is a graph that illustrates the price of a stock over a certain…

Q: In evaluating (stock) portfolio return we use the market values at the beginning of the period to…

A: The percentage of a particular stock or any asset in a portfolio is known as the weight of the asset…

Q: What should be the risk premium and return on a stock with a Beta of zero under the Capital Asset…

A: CAPM is Capital Asset Pricing Model, used to calculated required return of stock based on 3…

Q: A stock's standard deviation determines how the stock affects the riskiness of a diversified…

A: The standard deviation measures total risk and beta measures the market risk. The statement mentions…

Q: In what sense do these market value ratios reflect investors’ opinions about a stock’srisk and…

A: The ratios that relate the company's stock price to its earnings and the book value of each share.…

Q: Differentiate between the terms expected rate of return, required rate of return, and historical…

A: The expected rate of return is the normal rate of return that the speculation can anticipate. By and…

Q: Determine graphically the beta coefficients for Stocks A and B. b. Graph the Security Market Line,…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Is it possible to construct a portfolio of real-world stocks that has an expected return equal to…

A: Portfolio refers to basket of various financial assets and commodities that are held by single…

Q: What are the the key concepts (e.g., the standard deviation of the portfolio is less than the…

A: The question is based on the explanation of key concept behind creating a portfolio with different…

Q: c) What are the beta of the two stocks? d) Based on your calculation in b and c, which stock is…

A: Expected return E(r) = ∑p*r Standard deviation = √∑p*(r-E(r))2  Standard deviation measures the…

Q: What is risk aversion, and how is risk aversion related to the expected return on a stock

A: In the world of investment, the risk appetite of the investor is an important consideration when…

Q: If Stock A has a lower expected return than Stock B, which of the following statements is least…

A: Beta is a measure of systematic risk for the company or security. It is the risk measure to show to…

Q: beta for a stock

A: Introduction: Beta can be defined as a metric which helps in measuring the volatility of a stock…

Q: А. Compute the standard deviation of each stock. В. What is the covariance and correlation…

A: The mathematical measure of market uncertainty is the standard deviation. In stocks the standard…

Q: Calculate the expected return for Stock A.

A: Expected Return: It represents the profit or loss expected by an investor on an investment. It is…

Q: Beta is which of the following: A) standard deviation. B) total risk. C) Beta is the relationship…

A: option C is correct  Beta is the relationship which is between an investment's return, and the…

Q: Why is beta the theoretically correct measure of a stock’s risk?

A: Introduction: Risk refers to the degree of volatility involved in the anticipated return on…

Q: How do you calculate the beta of stock?

A: Beta is the measure of stock's volatility to the overall market, and is calculated as-

Q: how do you calculate a stocks average monthly return,its return variance ,standard deviation and…

A: Variance is a measure of risk of returns, it shows how much actual return has deviated from its…

Q: What role does sentiment play to explain stock price volatility? Explain

A: The role of emotion in determining the price of a company is one of the most significant aspects to…

Q: What are the arithmetic and geometric returns for the stock?

A: Arithmetic and Geometric mean are used to calculate the expected mean of the stock Arithmetic Mean…

Q: a. what is return on each of the three shortlisted stock? and what is the standard deviation of the…

A: Here, Probability of Recession is 70% Probability of Normal is 20% Probability of Boom is 10%

Q: Which of the following techniques is used to value stock options?   a. Black-Scholes method b.…

A: black scholes method is used to value options

Q: What effect does Standard Deviation of Stock returns have on call option price?

A: Standard Deviation of Stock Returns:The standard deviation of stock returns represent how much…

Q: What is the difference between stock price indexes that are simple averages of prices and those that…

A: A stock index, often known as a stock market index, is a financial index that monitors a stock…

Q: The interpretation of stock beta coefficient requires an assumption of an average stock which has a…

A: Beta is a measure of a security's systematic risk which cannot be diversified and measures the…

Q: Report the beta of each stock and demonstrate a clear understanding of the concept of market…

A: The efficient market hypothesis: The efficient market hypothesis postulates that it is impossible to…

Q: Determine graphically the beta coefficients for Stocks A and B. b. Graph the Security Market Line,…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: How can the model be used to estimate the predicted return ona stock?

A: Predicted rate of return: Predicting a rate of return is the method of calculating future rate of…

Q: Describe precisely one way that you would test if a particular stock market is strong-form…

A: Efficient Market Hypothesis is defined as the hypothesis in the financial economics, which states…

Q: How do I calculate the weighted bias of stocks?

A: Weighted bias of stocks also known as the price-weighted stock index, where each and every stock of…

Q: The standard deviation of a stock’s return is a measure of its?   Multiple Choice   systematic…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: What is the Security Market Line (SML)? How isbeta related to a stock’s required rate of return?

A: Security market line (SML): It could be a line drawn on a graph that works as a graphical…

Q: “Value-weighted index could provide a better signal on the market condition to the investors as…

A: Value weighted index is calculated using market capitalization of each firm as weights, which allows…

Q: A stock's risk premium is equal to the: expected market risk premium times beta. expected market…

A: In the given question we are given four options regarding stock's risk premium and we need to select…

Q: Stock X has the following data. Assuming the stock market is efficient and the stock is in…

A: The Constant Growth Model was developed by Gordon. This method assumes that a company grows at a…

Q: What are some analyzes we can do to predict which stock will go up?

A: Stock price movement is primarily speculative in the short term (two to three months). The price…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.