Question

Historical Returns: Expected and Required Rates of Return

You have observed the following returns over time:

Year |
Stock X |
Stock Y |
Market |

2011 | 15% | 14% | 10% |

2012 | 19 | 6 | 12 |

2013 | -17 | -3 | -12 |

2014 | 3 | 2 | 3 |

2015 | 19 | 12 | 17 |

Assume that the risk-free rate is 6% and the market risk premium is 6%. Do not round intermediate calculations.

- What is the beta of Stock X? Round your answer to two decimal
places.

What is the beta of Stock Y? Round your answer to two decimal places.

- What is the required rate of return on Stock X? Round your
answer to one decimal place.

%

What is the required rate of return on Stock Y? Round your answer to one decimal place.

% - What is the required rate of return on a portfolio consisting
of 80% of Stock X and 20% of Stock Y? Round your answer to one
decimal place.

%

Answer #1

Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2009
16%
14%
13%
2010
19
6
9
2011
-15
-2
-13
2012
2
1
1
2013
23
11
18
Assume that the risk-free rate is 3% and the market risk premium
is 6%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the beta of...

Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2009
14%
15%
13%
2010
20
7
9
2011
-15
-8
-12
2012
4
2
2
2013
24
13
18
Assume that the risk-free rate is 4% and the market risk premium
is 6%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the beta of...

Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2012
16%
15%
12%
2013
21
6
11
2014
-16
-6
-11
2015
3
3
1
2016
22
12
13
Assume that the risk-free rate is 4% and the market risk premium
is 7%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the beta of...

Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2012
16%
14%
14%
2013
21
7
11
2014
-14
-3
-10
2015
5
2
1
2016
21
9
17
Assume that the risk-free rate is 3% and the market risk premium
is 6%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the beta of...

Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2012
16%
12%
14%
2013
18
6
8
2014
-16
-4
-14
2015
5
2
3
2016
21
11
16
Assume that the risk-free rate is 6% and the market risk premium
is 6%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the beta of...

Problem 2-14
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2011
16%
12%
13%
2012
19
7
10
2013
-15
-2
-14
2014
4
1
1
2015
24
9
17
Assume that the risk-free rate is 4% and the market risk premium
is 7%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is...

Problem 6-14
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2012
15%
12%
12%
2013
18
8
9
2014
-14
-3
-14
2015
4
1
1
2016
20
12
18
Assume that the risk-free rate is 3% and the market risk premium
is 7%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the...

eBook
Problem 6-14
Historical Returns: Expected and Required Rates of Return
You have observed the following returns
over time:
Year
Stock X
Stock Y
Market
2012
14%
11%
11%
2013
17
7
11
2014
-13
-2
-11
2015
4
2
1
2016
21
8
15
Assume that the risk-free rate is 3%
and the market risk premium is 6%. Do not round intermediate
calculations.
What is the beta of Stock X? Round your
answer to two decimal places.
What is...

Required Rate of Return
Stock R has a beta of 1.9, Stock S has a beta of 0.65, the
expected rate of return on an average stock is 12%, and the
risk-free rate is 4%. By how much does the required return on the
riskier stock exceed that on the less risky stock? Round your
answer to two decimal places.
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock...

You have observed the following returns over time: Year: Stock
X: Market: 2014 18% 14% 2015 6% 8% 2016 23% 12% Assume that the
risk-free rate is 6% and the market risk premium is 5%. a) What are
the expected rates of return on Stock X and the market? b) What is
the standard deviation on Stock X and the market? c) What is the
Beta for Stock X given a correlation to the market of 0.8117? Is
Stock X...

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