INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 11, Problem 20PS
Summary Introduction
To select: The Company that won the lawsuit.
Introduction : The return rate basically measures the loss or gain of the company by comparing the values. It effects by the market index, value of beta, and fluctuations in the prices.
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In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was rA = 3.9%. The rate of return on Bpex was only rB = 3.5%. The market today responded to very encouraging news about the unemployment rate, and rM = 3.6%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as:
Apex: rA = 0.3% + 1.1rM
Bpex: rB = −0.1% + 0.7rM
a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.)
b. Which company do you think won the lawsuit?
Apex
Bpex
In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of
return on Apex was rд = 3.2%. The rate of return on Bpex was only r = 2.6%. The market today responded to very encouraging news
about the unemployment rate, and = 3%. The historical relationship between returns on these stocks and the market portfolio has
been estimated from index model regressions as:
Apex: A = 0.5% + 1.6rM
Bpex: r = -0.1% +0.4rM
a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.)
Apex
Bpex
Predicted Returns
%
%
b. Which company do you think won the lawsuit?
Apex
O Bpex
In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of
return on Apex was rд = 3.7%. The rate of return on Bpex was only r = 3.1%. The market today responded to very encouraging news
about the unemployment rate, and = 3.4%. The historical relationship between returns on these stocks and the market portfolio has
been estimated from index model regressions as:
Apex: A = 0.4% + 1.4rM
Bpex: rB = -0.1% + 0.7rM
a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.)
Apex
Bpex
Predicted Returns
%
%
Chapter 11 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 11 - Prob. 1PSCh. 11 - Prob. 2PSCh. 11 - Prob. 3PSCh. 11 - Prob. 4PSCh. 11 - Prob. 5PSCh. 11 - Prob. 6PSCh. 11 - Prob. 7PSCh. 11 - Prob. 8PSCh. 11 - Prob. 9PSCh. 11 - Prob. 10PS
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