PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 7, Problem 21PS
Stock betas* What is the beta of each of the stocks shown in Table 7.9?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
From Previous Question G):
>>>What is the beta? Explain with its formula.
g) Use the following two stocks. Scenario Probability Stock A Stock B Boom 30% 12% 20% Recession 70% 18% 5% i) Find the expected return on each stock. ii) Find the standard deviation of each stock. iii) Find the covariance between two stocks.
Suppose the beta estimated from the CAPM for stock A is 2.3 and stock B is 1.1. What is the beta of an equally weighted stock portoflio of A and B stock?
Assume a stock has a required return on equity, ?? = 12%. The risk-free rate is ?? = 5% and themarket return is ?? = 10%. Given this information, what is the beta of the stock?
Chapter 7 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 7 - Rate of return The level of the Syldavia market...Ch. 7 - Real versus nominal returns The Costaguana stock...Ch. 7 - Arithmetic average and compound returns Integrated...Ch. 7 - Risk premiums Here are inflation rates and U.S....Ch. 7 - Risk Premium Suppose that in year 2030, investors...Ch. 7 - Stocks vs. bonds Each of the following statements...Ch. 7 - Expected return and standard deviation A game of...Ch. 7 - Standard deviation of returns The following table...Ch. 7 - Average returns and standard deviation During the...Ch. 7 - Prob. 10PS
Ch. 7 - Prob. 11PSCh. 7 - Diversification Here are the percentage returns on...Ch. 7 - Risk and diversification In which of the following...Ch. 7 - Prob. 14PSCh. 7 - Portfolio risk To calculate the variance of a...Ch. 7 - Portfolio risk a) How many variance terms and how...Ch. 7 - Portfolio risk Table 7.8 shows standard deviations...Ch. 7 - Portfolio risk Hyacinth Macaw invests 60% of her...Ch. 7 - Stock betas What is the beta of each of the stocks...Ch. 7 - Stock betas There are few, if any, real companies...Ch. 7 - Portfolio betas A portfolio contains equal...Ch. 7 - Portfolio betas Suppose the standard deviation of...Ch. 7 - Portfolio risk Here are some historical data on...Ch. 7 - Portfolio risk Suppose that Treasury bills offer a...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- The following table shows betas for several companies. Company Beta Company 1 0.82 Company 2 1.45 Company 3 0.92 Company 4 0.69 Company 5 1.73 Company 6 1.78 Company 7 0.71 Company 8 0.61 Company 9 0.63 Company 10 2.27 You have equal investment in all stocks. What would be your portfolio beta?arrow_forwardThe metric that is used to show the extent to which a given stock’s return move up and down with the stock market? a. Correlation b. Beta c. Standard deviation d. Expected returnarrow_forwardExploring Finance: Betas and Stock Volatility. Betas: Stock Volatility Conceptual Overview: Explore how stock volatility relates to the beta coefficient b risk measure. The tendency of a stock to move with the market is measured by its beta coefficient, b. When first loaded, the graph shows the line for an average stock, which necessarily matches the market return. In a year when the market returns 10%, the average stock returns 10%. And in a year when the market goes down -10%, the average stock goes down -10% also. The slope of the line for the average stock is b = 1.0. A more volatile stock would change more extremely. Drag the line vertically so that it has a slope of b = 2.0. For this more volatile stock, in a year when the market returned 20%, the volatile stock did better with a 30% return, and when the market lost -10%, the volatile stock lost big with a -30% change. Now drag the line so that it has a slope of b = 0.5. This stock is less volatile than the average stock and…arrow_forward
- Plz show the formula step by step. There is the following table shows the probabilities of occurrence of 3 states and the expected rate of returns on stocks A and B State Probability Expected rate ofReturns on Stock A Expected rate ofReturns on Stock B Boom 0.5 0.25 0.20 Neutral 0.3 0.15 0.10 Recession 0.2 0.05 0.02 (A) Calculate the expected rates of returns and standard deviations of stocks A and B. The colleague has given you his forecasts of stocks C and D as follows: State Probability Expected rate ofReturns on Stock C Expected rate ofReturns on Stock D Boom 0.7 0.40 -0.10 Bust 0.3 -0.05 0.30 She would like to invest 80% of his money in stock C and 20% of her money in stock D to construct a portfolio.(B) Calculate the portfolio's expected rate of returns and its standard deviationarrow_forwardWhat is the required rate of return on a stock with a beta of 1.2, when the risk-free rate is 3.6% and the rate on the stock market is 14.4%arrow_forwarda) Calculate the expected return for Stock Media Prima and Stock Astrob) Calculate the standard deviation for Stock Media Prima and Stock Astroarrow_forward
- the following table shows the beta and expected return for each of five stocks. Stocks Beta Expected return 1 1.2 0.124 2 1.0 0.110 3 0.7 0.103 4 0.4 0.068 5 0.1 0.047 All of these stocks except one lie on the Security Market Line. Required: Calculate the alpha of the stock that does NOT lie on the Security Market Line.arrow_forwardWhen the required returns on all stocks are graphed against their corresponding betas, Question 16Answer a.we obtain the security market line b.No option is correct c.we obtain the beta d.we obtain the return linearrow_forwardUsing the single index model, what is the alpha of a stock with beta of 1.5, a market return of 14%, risk free rate of 3% and the actual return of the stock is 19%?arrow_forward
- Question 1 Suppose you have the following expectations about the market condition and the returns on Stocks X and Y. Market Condition Probability Return on Stock X Return on Stock Y Bear Market 0.3 -3% -5% Normal Market 0.5 3% 5% Bull Market 0.2 8% 15% a) What are the expected returns for Stocks X and Y, E(rX) and E(rY)? b) What are the standard deviations of the returns for Stocks X and Y, σX and σY?arrow_forwardIf a stock has a beta of 0.8, what doesthat imply about its risk relative to the market?arrow_forwardHow to start this question? g) Use the following two stocks. Scenario Probability Stock A Stock B Boom 30% 12% 20% Recession 70% 18% 5% i) Find the expected return on each stock. ii) Find the standard deviation of each stock. iii) Find the covariance between two stocks.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Portfolio return, variance, standard deviation; Author: MyFinanceTeacher;https://www.youtube.com/watch?v=RWT0kx36vZE;License: Standard YouTube License, CC-BY