Question

Stock A has an expected return of 13% and a standard deviation of 22%, while Stock B has an expected return of 15% and a standard deviation of 25%. If an investor is less risk-averse, they will be likely to choose…

A. Stock A

B. Stock B

Stock A has a beta of 1.8 and an expected return of 12%. Stock B has a beta of 0.7 and an expected return of 7%. If the risk-free rate is 2% and the expected market return is 8%, what is true about the two stocks?

A. Both stocks are overpriced

B. Both stocks are underpriced

C. Stock A is underpriced and stock B is overpriced

D. Stock A is overpriced and stock B is underpriced

E. Both stocks are correctly priced You have a portfolio with $20,000 invested in Stock A with a beta of 1.2, $30,000 in Stock B with a beta of 0.8, and $30,000 in Stock C with a beta of 1.1.

Should you invest $20,000 in Stock D with a beta of 1.6 and an expected return of 13% if the risk-free rate is 3% and the expected market return is 9%?

A. Yes

B. No

C. Not enough information to answer

Answer #1

#24 Stock A has a beta of 1.2 and an expected return of 12%.
Stock B has a beta of 0.7 and an expected return of 8%. If the
risk-free rate is 2% and the market risk premium is 8%, what is
true about the two stocks? A. Stock A is underpriced and stock
B is overpriced B. Both stocks are underpriced
C. Stock A is overpriced and stock
B is underpriced
D. Both stocks are correctly priced
E. Both...

Suppose you collect the information of two
stocks:
Expected Return
Standard Deviation
Beta
Stock A
13%
15%
1.6
Stock B
9.2%
25%
1.1
a. If you have a well-diversified portfolio of 50 stocks and you
are considering adding either Stock A or B to that portfolio, which
one is a riskier addition and why?
If you are a new investor looking for your first stock investment,
which is a riskier investment for you and why?
b. If the...

Security X has an expected rate of return of 13% AND A BETA OF
1.15. The risk-free is 5%, and the market expected rate of return
is 15%. According to the capital asset pricing model, security X is
_______.
a. fairly priced
b. overpriced
c. underpriced
d none of these answers
(I need assistance on how to calculate and conclude.)

A particular asset has
a beta of 1.2 and an expected return of 10%. The expected return on
the market portfolio is 13% and the risk-free rate is 5%.
The share is:
--
Hint:
Compare Expected Return to Required Return
A. overpriced
B. underpriced
C. appropriately priced
D. There is not enough information to answer the question.
Previous

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...

Stock Y has a beta of 0.7 and an expected return of 8.1 percent.
Stock Z has a beta of 1.8 and an expected return of 13.37 percent.
What would the risk-free rate (in percent) have to be for the two
stocks to be correctly priced relative to each other?
Answer to two decimals.

Q#25
The beta of Ricci Co.'s stock is 2.8, whereas the risk-free rate
of return is 8 percent. If the expected return on the market is 17
percent, then what is the expected return on Ricci Co.? Suppose
this stock has an expected return of 40%. Is this security properly
priced?
A)
42.80%, overpriced
B)
33.20%, overpriced
C)
42.80%, underpriced
D)
33.20%, underpriced

Stock A has an expected return of 12%, a standard deviation of
24% on its returns, and a beta of 1.2. Stock B has an expected
return of 15%, a standard deviation of 30% on its returns, and a
beta of 1.5. The correlation between the two stocks is 0.8. If we
invested $30,000 in Stock A and $20,000 in Stock B, what is the
beta of our portfolio?
Select one:
a. 1.03
b. 1.25
c. 1.32
d. 1.40
e....

Asset
E(R)
Std. deviation
A
17%
50%
Market (M)
10%
20%
Above is the expected return and standard deviation of a stock A
and the market portfolio. The correlation coefficient between A and
the market portfolio (M) is 0.5. The risk-free rate is 4%
Based on CAPM, stock A is ____________ because it offers an
alpha of ____________.
A.
underpriced; 7%
B.
underpriced; 5.5%
C.
overpriced; 5.5%
D.
underpriced; 0.5%
E.
overpriced; -0.5%

Asset
E(R)
Std. deviation
A
30%
50%
Market (M)
20%
20%
Above is the expected return and standard deviation of a stock A
and the market portfolio. The correlation coefficient between A and
the market portfolio (M) is 0.6. The risk-free rate is 4%
Based on CAPM, stock A is _____________ because it offers an
alpha of ________.
A.
underpriced;10.0%
B.
overpriced; 2.0%
C.
underpriced; 2.0%
D.
underpriced; 4.0%
E.
overpriced; -4.0%

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