Question

Suppose the standard deviation of the market return is 17%. a. What is the standard deviation...

Suppose the standard deviation of the market return is 17%.

a. What is the standard deviation of returns on a well-diversified portfolio with a beta of 1.4? (Enter your answer as a percent rounded to the nearest whole number.)

Standard deviation             %

b. What is the standard deviation of returns on a well-diversified portfolio with a beta of 0? (Enter your answer as a percent rounded to the nearest whole number.)

Standard deviation             %

c. A well-diversified portfolio has a standard deviation of 10%. What is its beta? (Round your answer to 2 decimal places.)

Beta            

d. A poorly diversified portfolio has a standard deviation of 17%. What can you say about its beta?

a.Less than 1.0

b. Equal to 1.0

c. Greater than 1.0

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer to Part a.

Standard Deviation of Returns = Standard Deviation of Market * Beta
Standard Deviation of Returns = 17% * 1.4
Standard Deviation of Returns = 23.80%

Answer to Part b.

Standard Deviation of Returns = Standard Deviation of Market * Beta
Standard Deviation of Returns = 17% * 0
Standard Deviation of Returns = 0

Answer to Part c.

Beta = Standard Deviation of Portfolio / Standard Deviation of Market Return
Beta = 10% / 17%
Beta = 0.59

Answer to Part d.

Beta is less than 1.0, as the Standard Deviation of Portfolio and market return is same but some risk are unique.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The market portfolio has an expected return of 11.0 percent and a standard deviation of 21.0...
The market portfolio has an expected return of 11.0 percent and a standard deviation of 21.0 percent. The risk-free rate is 4.0 percent.    a. What is the expected return on a well-diversified portfolio with a standard deviation of 8.0 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)      Expected return %    b. What is the standard deviation of a well-diversified portfolio with an expected return of 19.0...
Suppose the standard deviation of the market return is 20%. The risk-free rate is 3%. What...
Suppose the standard deviation of the market return is 20%. The risk-free rate is 3%. What is the standard deviation of returns on a well-diversified portfolio with a beta of 0.9? a. 22.22% b. 19.80% c. 16.20% d. 18.00% e. 21.00%
Suppose that the market portfolio has an expected return of 10%, and a standard deviation of...
Suppose that the market portfolio has an expected return of 10%, and a standard deviation of returns of 20%. The risk-free rate is 5%. b) Suppose that stock A has a beta of 0.5 and an expected return of 3%. We would like to evaluate, according to the CAPM, whether this stock is overpriced or underpriced. First, construct a tracking portfolio, made using weight K on the market portfolio and 1 − K on the risk-free rate, which has the...
14. Stock A has a beta of 1.95 and a standard deviation of return of 42%....
14. Stock A has a beta of 1.95 and a standard deviation of return of 42%. Stock B has a beta of 3.75 and a standard deviation of return of 70%. Assume that you form a portfolio that is 60% invested in Stock A and 40% invested in Stock B. Using the information in question 13, according to CAPM, what is the expected rate of return on your portfolio? Enter your answer rounded to two decimal places. Question 13 for...
Given the following probability distribution, what are the expected return and the standard deviation of returns...
Given the following probability distribution, what are the expected return and the standard deviation of returns for Security J? State                      Pi                              rj     1                          0.2                           12%     2                          0.3                           4%     3                          0.5                           17% Group of answer choices 12.10%; 5.93% 12.30%; 5.63% 12.40%; 5.63% 12.30%; 5.93% 12.10%; 5.63% Suppose you hold a diversified portfolio consisting of a $6,485 invested equally in each of 20 different common stocks.  The portfolio’s beta is 0.81.  Now suppose you decided to sell one of your stocks that has a beta of 1.4 and to use the proceeds...
The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50...
The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50 and a residual standard deviation of 40%. a-1. Calculate the total variance of stock A if its beta is increased by 0.10? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 decimal places.)   Total variance .3904 a-2. Calculate the total variance of stock A if its residual standard deviation is increased by 3.35% ? (Do not round intermediate calculations....
Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 35% standard...
Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 35% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations. CVx = CVy = Which stock is riskier for a diversified investor? For...
Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 35% standard...
Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 35% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 20.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations. CVx = CVy = Which stock is riskier for a diversified investor? For...
A project under consideration has an internal rate of return of 17% and a beta of...
A project under consideration has an internal rate of return of 17% and a beta of 0.5. The risk-free rate is 9%, and the expected rate of return on the market portfolio is 17%. a. What is the required rate of return on the project? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Should the project be accepted? c. What is the required rate of return on the project if its beta is 1.50? (Do...
Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 30% standard...
Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 30% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations. CVx =   CVy =   Which stock is riskier for a diversified investor? For...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT