Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 8, Problem 8TCL
Summary Introduction
To identify: Whether the higher-beta stocks tend to do better in up markets and worse in down markets.
Introduction:
Beta coefficient:
Beta coefficient measure the sensitivity of the stock in comparison with the market. It is a historical measure. It means it only takes past information into account.
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Students have asked these similar questions
Beta of stocks of Company SSAL is 1.2, company ABL is 0.9 and Company DSTL is 1. Which amongst the three companies would have higher return on Investment    a.Company SSAL    b.Company ABL    c.Company DSTL    d. The return on all three companies would be same
The following table shows betas for several companies.                                Â
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
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 You have equal investment in all stocks.  What would be your portfolio beta?
Jesse Corp.'s stock has a Beta of 0.94. The risk-free rate is 4%, and the expected market return is 9%. The firm's cost of common equity, Re, is _____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process.
Chapter 8 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 8 - Suppose you owned a portfolio consisting of...Ch. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - Is it possible to construct a portfolio of...Ch. 8 - Stock A has an expected return of 7%, a standard...Ch. 8 - A stock had a 12% return last year, a year when...Ch. 8 - If investors aversion to risk increased, would the...Ch. 8 - Prob. 8QCh. 8 - In Chapter 7, we saw that if the market interest...Ch. 8 - Suppose you own Stocks A and B. Based on data over...
Ch. 8 - Prob. 11QCh. 8 - EXPECTED RETURN A stocks returns have the...Ch. 8 - PORTFOLIO BETA An individual has 20,000 invested...Ch. 8 - REQUIRED RATE OF RETURN Assume that the risk-free...Ch. 8 - EXPECTED AND REQUIRED RATES OF RETURN Assume that...Ch. 8 - BETA AND REQUIRED RATE OF RETURN A stock has a...Ch. 8 - EXPECTED RETURNS Stocks A and B have the following...Ch. 8 - PORTFOLIO REQUIRED RETURN Suppose you are the...Ch. 8 - BETA COEFFICIENT Given the following; information,...Ch. 8 - REQUIRED RATE OF RETURN Stock R has a beta of 2.0,...Ch. 8 - Prob. 10PCh. 8 - CAPM AND REQUIRED RETURN Calculate the required...Ch. 8 - REQUIRED RATE OF RETURN Suppose rRF = 4%, rM =...Ch. 8 - CAPM, PORTFOLIO RISK, AND RETURN Consider the...Ch. 8 - Prob. 14PCh. 8 - Prob. 15PCh. 8 - CAPM AND PORTFOLIO RETURN You have been managing a...Ch. 8 - PORTFOLIO BETA A mutual fund manager has a 20...Ch. 8 - EXPECTED RETURNS Suppose you won the lottery and...Ch. 8 - EVALUATING RISK AND RETURN Stock X has a 10%...Ch. 8 - REALIZED RATES OF RETURN Stocks A and have the...Ch. 8 - Prob. 21PCh. 8 - Prob. 22SPCh. 8 - Prob. 23ICCh. 8 - Prob. 1TCLCh. 8 - USING PAST INFORMATION TO ESTIMATE REQUIRED...Ch. 8 - Prob. 4TCLCh. 8 - Prob. 5TCLCh. 8 - Prob. 7TCLCh. 8 - Prob. 8TCL
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- Stock XYZ has a beta of 0.50 and Stock ABC has beta of 1.00. According to CAPM, Stock XYZ has a A. higher market risk exposure than stock ABC B. lower required return than stock ABC C. lower realized return than stock ABC D. higher total risk exposure than stock ABCarrow_forwardRan Company wants to determine its cost of common stock equity using the CAPM. The company's investment advisors indicate that the firm’s beta is equals to 1.3;the risk-free rate is 6%; and the market return is 10%. (Do not round off between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%)arrow_forwardKaskin, Inc., stock has a beta of 1.2 and Quinn, Inc., stock has a beta of .6. Which of the following statements is most accurate? The expected rate of return will be higher for the stock of Kaskin, Inc., than that of Quinn, Inc. The stock of Kaskin, Inc., has more total risk than the stock of Quinn, Inc. The stock of Quinn, Inc., has more systemic risk than that of Kaskin, Inc.arrow_forward
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- Company A has a beta of 0.9 , while Company B's beta is 1.4 . The market risk premium is 13.78 %, and the risk-free rate is 4.25%. What is the difference between A's and B's required rates of return? (Hint: find the required returns on each stock and then subtract them.)arrow_forwardQuantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return  Strong 0.25 22 % Normal 0.50 9 % Weak 0.25 -6 % What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places.  % What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places.  % What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places.arrow_forwardStock A has beta of 1.2 and Stock B has beta of 1. The returns of Stock A are____ sensitive to changes in the market as the returns of Stock B.   Slightly less 20% less Slightly more 20% morearrow_forward
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