UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Textbook Question
Chapter 12, Problem 2QP
Factor Models Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those three factors is presented in the following chart:
- a. What is the systematic risk of the stock return?
- b. Suppose unexpected bad news about the firm was announced that causes the stock price to drop by 1.1 percent If the expected return on the stock is 11.7 percent, what is the total return on this stock?
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You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities?
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Stock A
Stock B
Normal
.75
.13
.16
Recession
.25
−.05
−.21
Over time, the unexpected return on a company's stock is expected to equal
Multiple Choice
the company's average rate of return.
the average return on the overall market.
zero,
the risk-free rate.
the market risk premium.
1) what is the expected return rate for stock A
2) what is the expected return rate for stock B
3) what is the standard deviation of returns for stock A
4) what is the standard deviation of returns for stock B.
Chapter 12 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 12 - Prob. 1CQCh. 12 - Prob. 2CQCh. 12 - Prob. 3CQCh. 12 - Prob. 4CQCh. 12 - Market Model versus APT What are the differences...Ch. 12 - APT In contrast to the CAPM, the APT does not...Ch. 12 - CAPM versus APT What is the relationship between...Ch. 12 - Prob. 8CQCh. 12 - Data Mining What is data mining? Why might it...Ch. 12 - Prob. 10CQ
Ch. 12 - Prob. 1QPCh. 12 - Factor Models Suppose a three-factor model is...Ch. 12 - Prob. 3QPCh. 12 - Multifactor Models Suppose stock returns can be...Ch. 12 - Prob. 5QPCh. 12 - Market Model The following three stocks are...Ch. 12 - Prob. 7QPCh. 12 - Prob. 8QPCh. 12 - APT Assume that the following market model...Ch. 12 - Prob. 10QP
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Portfolio return, variance, standard deviation; Author: MyFinanceTeacher;https://www.youtube.com/watch?v=RWT0kx36vZE;License: Standard YouTube License, CC-BY