Question

2. Within the framework of the CAPM: If stock A has a higher standard deviation and a higher correlation with the market portfolio than stock B, then A’s beta is higher than B’s beta. (yes or no and give explanation to justify your answer)

Answer #1

**Answer-**

**The answer is Yes. The stock A's beta will be higher
than stock B's beta. A stock with higher standard deviation will
have higher risk and will automatically contribute a lot of risk to
the portfolio.
As the stock A has higher correlation with the market portfolio
means that the diversificaion will not be of any significance and
the stock A which has high risk will add to overall risk to the
market portfolio and will have a higher beta than the other stock B
which has lower standard devation and lower risk.**

**in general we can conclude that the stock with higher
standard deviation and higher correlation will have higher risk and
higher beta value than a stock with lower standard deviation and
lower risk.**

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...

Consider the CAPM model. Stock A has a risk premium of 13%, and
its standard deviation is 18%. The market index has a risk premium
of 12%. The T-bill rate is 2%. The correlation between A and the
market index is 0.1735. What is the standard deviation of the
market index?
A. 0.0255
B. 0.0212
C. 0.0288
D. 0.0831

1. The
risk-free rate of interest is 2%. Stock AAA has a beta
of 1.4 and a standard deviation of return = .40. The
expected return on the market portfolio is 9%. Assume CAPM
holds. (Note: the questions below are
independent not sequential.)a) Plot
the security market line. Label all axes of your
graph. Plot (and label) the points (and numerical
values) corresponding to the market portfolio, the
risk-free asset, and stock AAA.b) Your
current wealth is $1,000. What is the expected
returnfor a portfolio where youborrow$500 at the risk-free...

A security has a higher standard deviation than that of the
market portfolio. This security must have a beta that is greater
than 1. Is this statement: Group of answer choices True False

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...

For each of the following statements clearly
indicate whether the statement is true or false. Provide a
brief explanation to justify your answer. Your answer
must begin with "True" or
"False" followed by your explanation. Note
that your explanation cannot just be a restatement of the question
statement.
a) A security with a beta of 0.8 can have a standard deviation
of return that is greater than the market portfolio’s standard
deviation of return. (Begin your answer with
"True" or...

The standard deviation of Asset A returns is 36%, while the
standard deviation of Asset M returns is 24%. The correlation
between Asset A and Asset M returns is 0.4.
(a) The average of Asset A and Asset M’s standard deviations is
(36+24)/2 = 30%. Consider a portfolio, P, with 50% of funds in
Asset A and 50% of funds in Asset M. Will the standard deviation of
portfolio P’s returns be greater than, equal to, or less than 30%?...

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...

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...

A- The CAPM says that the average return on a stock should be at
least the return on a riskless asset and compensation for
bearing
choose one of the following:
1-firm-specific risk. 2-market risk. 3-firm-specific and market
risk. 4-alpha risk. 5- beta risk. 6- alpha and beta risks.
B- Since the market portfolio beta is equal to
---------------------a stock with a beta of 1.00
is---------------------the market portfolio.
choose two of the following for each blink:
1- 0 2- 1 3-100...

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