You have been assigned the task of estimating the expected returns for three different stocks: A, B, and Č. Your preliminary analysis has established the historical risk premia associated with three risk factors that could potentially be included in your calculations: the excess return on a proxy for the market portfolio (MKT), and two variables capturing general macroeconomic exposures (MACRO1 and MACRO2). These values are: AMkt = 7.5%, AmACRo1 = -0.3%, and AMacro2 = 0.6%. You have also estimated the following factor loadings for all three stocks with respect to each of these potential risk factors: Stock MKT MACRO1 MACRO2 A 1.24 -0.42 0.54 -0.09 B 0.91 0.23 1.03 a) Calculate expected returns for three stocks using just the MKT risk factor. Assume a risk-free rate of 4.5%. b) Calculate the expected returns for three stocks using all three risk factors and Activate the same 4.5% risk-free rate. Go to Settin
You have been assigned the task of estimating the expected returns for three different stocks: A, B, and Č. Your preliminary analysis has established the historical risk premia associated with three risk factors that could potentially be included in your calculations: the excess return on a proxy for the market portfolio (MKT), and two variables capturing general macroeconomic exposures (MACRO1 and MACRO2). These values are: AMkt = 7.5%, AmACRo1 = -0.3%, and AMacro2 = 0.6%. You have also estimated the following factor loadings for all three stocks with respect to each of these potential risk factors: Stock MKT MACRO1 MACRO2 A 1.24 -0.42 0.54 -0.09 B 0.91 0.23 1.03 a) Calculate expected returns for three stocks using just the MKT risk factor. Assume a risk-free rate of 4.5%. b) Calculate the expected returns for three stocks using all three risk factors and Activate the same 4.5% risk-free rate. Go to Settin
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter11: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11.18E
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