Question

1 The horizontal axis of the securities market line plots   Blank 1. Fill in the blank, read surrounding text. of a security or portfolio. [Hint: one word, four to six letters.]  

2 On March 21, 2020, you buy a round lot of JNL common stock for $45.72 per share, and on November 12, 2024, you sell your position for $60.15 per share. Rounded to two decimal places as a percent, your annualized return on this investment is   Blank 1. Fill in the blank, read surrounding text. %.  

Answer 1

1. Security market line gives the relationship between Stock beta and Stock return.

Therefore, on X-axis, it plots Beta

2. Holding period return is given by, HPY (%) = (Gain in investment/Initial investment)*100 for the period

Here, Initial investment = $45.72

Gain on investment = Selling Price - Buying Price

= 60.15 - 45.72

= $14.43

Therefore, HPY = (14.43/45.72)*100

= 31.56% for 1697 days

(difference in dates = 1697 days calculated using excel)

Therefore, effective annualized return = [(1 + 31.56%)^(365/1697)] - 1

(assuming 365 days in an year)

= 6.08% annual return