You have bought a stock for a $100. You are expecting to get a return of 10% while the volatility of your stock is 20%. if you intend to sell the stock after one year. a- What is the stock price range (upper and lower bound) assuming that the stock returns are normally distributed, and a two-tailed confidence interval of 90% ? explain your answer. b- What is the Value at Risk of this investment at a confidence interval of 90% and 95%? explain your answer. c- What are the similarities and differences in calculating the above questions (a and b)

Q: (a) An investor is considering a stock worth Rs.555 per share today that pays a 9% annual dividend…

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

Q: What is the expected rate of return and standard deviation on this stock?

A: The expected rate of return is a statistical degree used for studying the portfolio. It is the…

Q: Suppose the returns on a small stock are normally distributed. The historical average return is 18…

A: a) Z score = (expected return - actual return) / Standard Deviation Z score = (18%-12%)/6% Z score =…

Q: Your broker has recommended that you purchase stock in Alacan, Inc. She estimates that the 1-year…

A: Cost of equity = Rf + Beta * ( Rm - Rf ) = 2.70% + 0.91 * 9.50% = 2.70% + 8.645% = 11.345%

Q: You have been managing a $5 million portfolio that hasa beta of 1.15 and a required rate of return…

A: Risk-free rate: This can be described as the rate of return of the asset which has zero risks.…

Q: You would like to invest $14,000 and have a portfolio expected return of 9.5 percent. You are…

A: A portfolio is the collection of different securities. Portfolio management helps in the…

Q: You are thinking of buying a stock priced at $106 per share. Assume that the risk-free rate is about…

A: according to CAPM: Rstock =rf+β×rm-rfwhere,rf= risk free raterm= market return

Q: You expect the risk-free rate (RFR) to be 3 percent and the market return to be 10 percent. You also…

A: Using CAPM

Q: You are considering an investment in the common stock of Crisp's Cookware. The stock is expected to…

A: A stock is a financial security issued by a corporation to raise equity funds for the long-term…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: Rf = 4.7% Rm-Rf = 5.5% beta = 0.9 D1=$2.25

Q: You are considering an investment in Eagle Corporation's stock, which is expected to pay a dividend…

A: GIVEN, Rf=3.3% beta = 0.9 Rm= 5% therefore,  from CAPM model,…

Q: expected return and volatility​ (

A: Expected return refers to the profit or loss that an investor should earn from an investment that…

Q: stock price is 43 and we need to price a call option with a strike of 45 maturing in 4 months. The…

A: The given problem relates to black scholes model.

Q: You are holding a stock which has a beta of 2.0 and is currently in equilibrium. The required return…

A: First we need to find out the risk free rate by using CAPM formula rs =Rf +β*(Rm -Rf) rs =Required…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: Cost of equity = Risk free rate + beta * market risk premium Cost of equity = 5.60% + (0.9*5%) Cost…

Q: You are thinking of buying a stock priced at $98 per share. Assume that the risk-free rate is about…

A: Holding period return = Dividend paid + ( Price at year 1 - Price at year 0 ) / Price at year 0

Q: You have been managing a $5 million portfolio that has a beta of 1.25 and a required rate of return…

A: According to capital asset pricing model(CAPM), Expected ( required) return = Risk free rate + Beta…

Q: The current price of a stock is $100 and has volatility σ of 0.25. The continuous risk free rate is…

A: Working note:

Q: You are considering an investment in Justus Corporation’s stock, which is expected to pay a dividend…

A: The formula to compute price of the stock at the end of 3 years as follows:

Q: For example an investor is contemplating a stock worth $300 per share that pays a 3% annual…

A: Solution:- As per Capital Asset Pricing Model (CAPM),  ERi = Rf + (ERm - Rf) x Beta Where, ERi =…

Q: You have been managing a $5 million portfolio that has a beta of 1.15 and a required rate of return…

A:

Q: ck price is 40 and we need to price a call option with a strike of 50 maturing in 4 months. The…

A: The given problem can be solved using Black scholes model.

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: given, beta= 0.9 Rf=2.9% market risk premium = 6% from CAPM, Ke =Rf + beta * market risk premium Ke…

Q: The stock of Big Joe's has a beta of 1.50 and an expected return of 12.60 percent. The risk-free…

A: Given: Beta = 1.50 Expected return = 12.60% Risk free rate = 5.1%

Q: (a) An investor is considering an investment in XYZ stock.  The risk-free rate of return is 0.45%,…

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

Q: You expect the risk-free rate (RFR) to be 3 percent and the market return to be 10 percent. You also…

A: If Capital Asset Pricing Model hold good Required Return = Risk Free rate + (market Return - Risk…

Q: You have been managing a $5 million portfolio that has a beta of 1.05 and a required rate of return…

A: Portfolio return refers to the gain or loss realized by an investment portfolio containing several…

Q: The​ risk-free rate is 3.7% and you believe that the​ S&P 500's excess return will be 11​% over the…

A: CAPM or Capital Asset Pricing Model is the formula that represents the relationship between the…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: Capital invested in the business comes with the respective cost called the cost of capital.  It…

Q: ppose the stock price is 40 and we need to price a put option with a strike of 45 maturing in 4…

A: The given problem relates to black-Scholes Model.

Q: You have been managing a $5 million portfolio that has a beta of 0.85 and a required rate of return…

A: E(R) = Rf + (beta * (Rm - Rf)) E(R) = Expected return = 5.825% Rf = Risk free rate = 2% Beta = 0.85…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: in this problem we have to calculate required rate of return using CAPM and find out required growth…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: according to gordon's growth : Pi=Di+1r-g where, Pi= price at year i DI+1= Dividend at year i+1 r=…

Q: You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend…

A: The capital asset pricing model (CAPM) represents the minimum rate of return required by investors…

Q: A stock is expected to pay a dividend of $2.25 at the end of the year. Its beta is 1.4, the market…

A: Stock Price for an entity can be computed using dividend amount as growing perpetuity in case growth…

Q: Suppose that three stocks (A, B, and C} and two common risk factors (1 and 2) have the following…

A: We have:E(rA) = (1.1)A1 + (0.8)A2E(rB) =(0.7)A1+(0.6)A2E(rC) =( 0.3)A1+(0.4)A2A1 = 4%A2 = 2%

Q: If you buy stock for a price of 23 dollars and if you expect to get a return of 1242 one year from…

A: P0 = Return / (ke-g) Where, ke = Required rate of return g =growth rate  P0 =stock price

Q: You invested $1000 in a stock that has a 15% chance of a 1% return, a 60% chance of a 5% return and…

A: Expected return is profit an investor can anticipate getting on an investment., which is calculated…

Q: You have $260,000 to invest in a stock portfolio. Your choices are Stock H, with an expected return…

A: The expected return of a portfolio helps the investor to determine the performance of the portfolio.

Q: You build a binomial model with one period and assert that over the course of a year, the stock…

A: The standard measure of the dispersion of data which helps in measuring the risk and volatility of…

Q: The risk-free rate is 3% and you believe that the S&P 500's excess return (market risk premium) will…

A: Risk free rate = 3% Market risk premium = 10% Beta = 1.2

Q: You expect HGH stock to have a 20% return next year and a 45% volatility. You have $25,000 to…

A: Volatility Volatility indicates the pricing behavior of the security  is indicated by volatility.…

Q: The risk-free rate of return is 1 percent, and the expected return on the market is 7.1 percent.…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: An investor is considering a stock worth Rs.555 per share today that pays a 9% annual dividend .The…

A: The capital Asset Pricing Model is considered as one of the most accurate form of calculating…

Q: ose the stock price is 40 and we need to price a call option with a strike of 45 maturing in 4…

A: The given problem relates to black and scholes model.

Q: The risk-free rate is 4.6 % and you believe that the S&P 500's excess return will be 11.2 % over…

A: Given: Expected excess return over next year = 11.2% Beta of stock = 1.4