Question

Expected return on two stocks for two particular market returns:

Market return/Aggressive stock/Defensive St

5%
-2%
6%

25%
38%
12%

a. What are the beta's of the two stocks?

b. What is the expected rate of return on each stock if the market return is equally likely to be 5% or 25%?

c. If the t-bill rate is 6% and the market return is equally likely to be 5% or 25%, draw the SML for this economy.

please show all work

Answer #1

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Expected return on two stocks for two particular market
returns:
Market
Return
Aggressive Stock
Defensive Stock
5%
2%
8%
20%
25%
20%
What are the betas of the two stocks?
What is the expected rate of return on each stock if the market
return is equally likely to be 5% or 20%?
If the T-bill rate is 4% and the market return is equally
likely to be 5% or 20%, draw the SML for this economy.
Between aggressive and defensive...

1. Expected return on two stocks for two particular market
returns: Market Return Aggressive Stock Defensive Stock 2% -5% 3%
22% 35% 15% a. What are the betas of the two stocks? b. What is the
expected rate of return on each stock if the market return is
equally likely to be 2% or 22%? c. If the T-bill rate is 3% and the
market return is equally likely to be 2% or 22%, draw the SML for
this economy....

1. Expected return on two stocks for two particular market
returns: Market Return Aggressive Stock Defensive Stock 2% -5% 3%
22% 35% 15% a. What are the betas of the two stocks? b. What is the
expected rate of return on each stock if the market return is
equally likely to be 2% or 22%? c. If the T-bill rate is 3% and the
market return is equally likely to be 2% or 22%, draw the SML for
this economy....

Expected return on two stocks for two particular market
returns:
Market Return
Aggressive Stock
Defensive Stock
5%
0%
6%
30%
40%
20%
What are the betas of the two stocks?
What is the expected rate of return on each stock if the market
return is equally likely to be 5% or 30%?
If the T-bill rate is 4.5% and the market return is equally
likely to be 5% or 30%, draw the SML for this economy....

Expected return on two stocks for two particular market
returns:
Market
Return
Aggressive Stock
Defensive Stock
5%
-2%
6%
25%
38%
12%
What are the betas of the two stocks (Hint: compute each
stock’s beta by calculating the difference in its return across the
two scenarios divided by the difference in the market return)?
What is the expected rate of return on each stock if the market
return is equally likely to be 5% or 25% (Hint: ‘equally...

Expected return on two stocks for two particular market
returns: Please show all work.
Market
Return
Aggressive Stock
Defensive Stock
5%
1%
8%
20%
25%
18%
What are the betas of the two stocks?
What is the expected rate of return on each stock if the market
return is equally likely to be 5% or 20%?
If the T-bill rate is 3% and the market return is equally
likely to be 5% or 20%, draw the SML...

Consider the following table, which gives a security analyst’s
expected return on two stocks in two particular scenarios for the
rate of return on the market:
Market Return
Aggressive Stock
Defensive Stock
5%
-2%
6%
25
38
12
If the T bill rate is 6% and the market return Is equally
likely to be 5% or 25% draw the SML for this economy.
Plot the two security on the SML graph. What are the alphas of
each?

Consider the following Table, which gives a security analyst’s
expected returns on two stocks and the market portfolio for two
possible economic states:
Market Portfolio, Aggressive Stock , Defensive Stock
State 1 3% 6% 9%
State 2 9% 24% 18%
a) What are the market betas of the two stocks?
b) What is the expected rate of return on each stock if the
economy is equally likely to be in the two economic states?
c) If the T-bill rate is...

14. Expected Returns. Consider the following two
scenarios for the economy and the expected returns in each scenario
for the market portfolio, an aggressive stock A, and a defensive
stock D.
Rate of Return
Scenario
Market
Aggressive Stock A
Defensive Stock D
Bust
-8%
-10%
-6%
Boom
32
38
24
Find the beta of each stock. In what way is stock D
defensive?
If each scenario is equally likely, find the expected
rate of return on the market portfolio and...

Consider the following two scenarios for the economy and the
expected returns in each scenario for the market portfolio, an
aggressive stock A, and a defensive stock D.
Rate of Return
Scenario
Market
Aggressive
Stock A
Defensive
Stock D
Bust
–5
%
–7
%
–3
%
Boom
27
35
19
Required:
a. Find the beta of each stock.
b. If each scenario is equally likely, find the
expected rate of return on the market portfolio and on each
stock.
c....

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