I will have info on 2 portfolios and the market benchmark, and you will calculate the CAPM = Rf + B(Rm - Rf) , Sharpe Ratio, Alpha=Rp - CAPM Stock Stock Stock Description Portfolio Z Portfolio X Benchmarket Average Retun 15.00% 18.00% 9.00% Risk-Free Return 1.50% 1.50% 1.50% Standard Deviation 22.00% 33.00% 16.00% Beta 1.250 1.400 1.000 Output Risk Premium Retun Market Premium Capital Asset Pricing Model Sharpe Ratio Jensen's Alpha
Q: Consider a portfolio consisting of the following three stocks: The volatility of the market…
A: By using the CAPM approach, the expected return of the stock is calculated. A portfolio consists of…
Q: Assume you have invested in two other stocks: Stock A has a beta of 1.20 and Stock B has a beta of…
A: Given data for stock A: risk free rate (Rf) = 2 % market return ( Rm) = 12% Beta = 1.20 Using CAPM…
Q: Industry stock has a beta of 1.8, the risk-free rate is 4.40%, and the market risk premium (MRP) is…
A: CAPM stands for Capital Asset Pricing Model which indicates the relation between the expected…
Q: Consider the following information: Probability of State of Economy 0.54 0.46 State of Rate of…
A: Expected return refers to the anticipated amount of profit or loss that an investor calculates from…
Q: If you create a portfolio for your client with 73 percent invested in the S&P 500 U.S. stock index…
A: Portfolio return is the weighted average return of the various securities of the portfolio:…
Q: What is the expected return for the following portfolio? (State your answer in percent with two…
A: Solution:- Expected return for the portfolio (in percentage) = Summation of (Weight of Asset x…
Q: Assume you have invested in two other stocks: Stock A has a beta of 1.20 and Stock B has a beta of…
A: Required return calculation is wrong. Correct solution is provided below.…
Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…
A: The Treynor measure (T) relates the rate of return earned above the risk‑free rate to the…
Q: Suppose you are given stocks A and B. Stock A has an expected return of 11% and a standard deviation…
A: The provided information are: Stock Expected return Standard deviation A 11% 4%…
Q: Consider a portfolo consisting of the following three stocks: E The volatility of the market…
A: Beta is used as a measure of systematic risk in the CAPM model. It provides a direct relation…
Q: Stock Number of shares Stock Price Beta A 750 33 1.2 В 220 51 0.8 460 19 1.4 Economic condition…
A: Since only part b is required, the answer for part b is provided as per given instructions.
Q: Suppose that the risk-free rate ry = 0.03, the expected market return µM = 0.11, and the market…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: Assume that you own a portfolio consisting of the following stocks: Stock Percentage of Portfolio…
A: The expected return on a portfolio calculates the expected value of a portfolio. The probability…
Q: Using the single index model, what is the alpha of a stock with beta of 1.5, a market return of 14%,…
A: As per CAPM Expected return = Risk free rate + ( Market return - Risk free rate ) * Beta Alpha =…
Q: Stock Number of shares Stock Price Beta A 750 33 1.2 B 220 51 0.8 C 460 19 1.4 Economic condition…
A: Since, it's a lengthy question only part a is solved. Kindly upload part b separately. Solution:…
Q: Need help on all
A: Hi there, Thanks for posting the question. As per Q&A Guidelines, we should answer the first…
Q: You have a two-asset portfolio that comprises stocks XX and ZZ. The information related to these two…
A: The Expected return of a portfolio refers to the total return which is expected by the investor…
Q: Forecast Returns, Standard Deviations, and Betas Forecast Return Standard Deviation Beta Low β stock…
A: Expected return for each stock- = Rf+ beta (Rm-Rf) Stock X= 0.05+ 0.8x (0.14-0.05) = 12.20% Stock Y=…
Q: Stock A has an expected return of 10 percent and a beta of 1.0. Stock B has a beta of 2.0. Portfolio…
A: CAPM stands for capital asset pricing model. It explains the relationship between systematic risk…
Q: CAPM, PORTFOLIO RISK. AND RETURN Consider the following information for Stocks X, Y, and Z. The…
A: Note : As per our guidelines, we can only answer up to 3 subparts only. Please post other parts…
Q: Consider an investment portfolio that consists of three different stocks, with the amount invested…
A: Given The risk free rate is 2.5% The market risk premium is 6%
Q: Stock X and Stock Y has following distribution: Stock X: expected return of 10%, a beta coefficient…
A: (iv) Here the expected return should be greater than the required rate. We should select stock Y…
Q: Suppose you have portfolio of four stocks Stock A, B, C and D, Total investment in these stocks is…
A: According to CAPM required rate is equivalent to risk free rate plus market risk premium.
Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…
A: Treynor ratio = (Average return - Risk free rate)/Beta Sharpe ratio = (Average return - Risk free…
Q: In the CAPM world, if Sharpe ratio of the market portfolio is 1.25 and the correlation coefficient…
A: Sharpe ratio is used to determine the excess return which is earned by the investor for investing…
Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…
A: The beta of A is 0.45 Beta of B is 1 The SD of A is 0.28 SD of B is 0.21 SD of market is 16%. Weight…
Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…
A: Given: RA = 4.0% + 0.50RM + eA RB = –1.2% + 0.70RM + eB σM = 17% R-squareA = 0.26 R-squareB = 0.18…
Q: a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not…
A: “Since you have posted a question with multiple subparts, we will solve first three subparts for…
Q: Consider an economy where Capital Asset Pricing Model holds. In this economy, stocks A and B have…
A: “Since you have posted a question with multiple subparts, we will solve first three subparts for…
Q: Suppose that index model for Stocks A and B is estimated from excess returns with the following…
A: Systematic risk is the portion of the overall risk induced by factors outside the control of a…
Q: You have a portfolio which consists of 75% of stock 1 (o^2 = 0.16) and 25% of stock 2 (o^2 = 0.09).…
A: Return on the stock is based on the risk free rate, market return and the risk associated with the…
Q: Suppose you created a two-stock portfolio by investing $50,000 in High Tech and $50.000 in…
A: To Find: Portfolio expected return Standard deviation of portfolio Sharpe ratio CoV
Q: Currently the risk-free rate equals 5% and the expected return on the market portfolio equals 11%.…
A: Given: Risk free rate “Rf” = 5% Market return “Rm” = 11% Stock A Beta = 1.33 Stock B Beta = 0.7…
Q: Suppose you have the following information concerning a particular options. Stock price, S = RM 21…
A: Given: Particulars Amount Current stock price 21.00 Standard deviation 50% Risk free rate…
Q: Consider two types of assets: market portfolio (M) and stock A. The expected return is 8% and…
A: Given: Market rate = 8% Risk free rate = 2% Standard deviation of market portfolio = 15% Standard…
Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…
A: The measure of amount of variation of a set of values is called as standard deviation. It is the sum…
Q: Stock M has a relevant risk equals 1.75, and unsystematic risk equals 2. If the real risk-free rate…
A: RRR adjusted for inflation = [(1+RRR)/(1-i)] - 1 where RRR is Required Rate of Return = Risk Free…
Q: Consider three scenarios with the probabilities given below. Let the returns on two different stocks…
A:
Q: f you create a portfolio for your client with 73 percent invested in the S&P 500 U.S. stock index…
A: Portfolio return is the weighted average return of the various securities of the portfolio:…
Q: You have observed the following returns over time: Stock X…
A: Formulas:
Q: You are given the following information about a portfolio consisting of stocks X, Y, and Z: Stock…
A: The provided table is: Stock Investment Expected return X 10,000 8% Y 15,000 12% Z 25,000…
Q: Consider the following two scenarios for the economy and the expected returns in each scenario for…
A: Beta of Stock = Change in Rate of Return of Stock / Change in Market return Therefore, Beta of Stock…
Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…
A: Formulas:
Q: The data on the expected return of 2 stocks (M and C) along with the economic conditions and their…
A: Expected return of a stock is the minimum rate of return that an investor expects from the security…
Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…
A: We know that, Beta of Stock = correlation*Standard Deviation of Stock/Standard Deviation of Market…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
- Using the following data: Scenario Probability return K1 return K2 0.2 -10% 5% W2 0.4 0% 30% W3 0.4 20% -5% compute the weights in the portfolio with minimum risk. What are the expected return and risk of this minimum risk portfolio?You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 16.00% бр 32.00% 15.00 27.00 7.30 17.00 11.30 5.80 22.00 0 Bp 1.90 1.25 0.75 1.00 0 Assume that the tracking error of Portfolio X is 13.40 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. Information ratioYou are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Op 1.45 1.20 0.75 1.00 Portfolio: X Y Z Market Risk-free Rp 11.00% 10.00 8.10 10.40 5.20 Information ratio Op 33.00% 28.00 18.00 23.00 0 Assume that the tracking error of Portfolio X is 9.10 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. 02148 0
- You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio X Y Z Market Risk-free Rp 14.0% 13.0 .8.5 12.0 7.2 Ор 39.00% 34.00 24.00 29.00 0 Bp 1.50 1.15 0.90 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.90. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. R-squaredYou are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 13.5% бр 35.00% 12.5 30.00 7.1 20.00 10.6 4.4 25.00 0 Вр 1.55 1.20 0.80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.70. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. × Answer is complete but not entirely correct. R-squared 0.9785You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio X Y Z Market Risk-free Rp 11.0% ор 33.00% 10.0 28.00 8.1 10.4 5.2 18.00 23.00 Ө вр 1.45 1.20 0.75 1.00 Ө Assume that the correlation of returns on Portfolio Y to returns on the market is 0.66. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. R-squared
- You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: 8p 1.70 1.30 0.85 1.00 Portfolio X Y Z Market Risk-free Rp 11.5% 10.5 7.2 10.9 4.6 R-squared op 38.00% 33.00 23.00 28.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.76. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places.You are given the following information concerning three portfolios, the market portfolio, and the risk- free asset: Portfolio X Y Z Market Risk-free Rp 14.5% R-squared 13.5 9.1 10.7 5.4 op 36% 31 21 26 0 6p 1.60 1.30 .80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 72. What percentage of Portfolio Y's return is driven by the market? (Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places.)You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Rp X 15.0% Y 14.0 Z 9.0 Market 10.3 Risk-free 4.2 op 32% 27 17 22 0 Portfolio X Y Z Market 6p 1.40 1.10 0.75 1.00 What are the Sharpe ratio, Treynor ratio, and Jensen's alpha for each portfolio? (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Leave your ratio answers as a decimal rounded to 5 places (e.g., 0.23546). Enter your alpha answers as a percent rounded to 2 decimal places (e.g., 0.22%).) Sharpe Ratio Treynor Ratio Jensen's Alpha % % % %
- Use the following CAPM equation for a portfolio to answer the questions that follow:E(RP) = RF + βP (RM – RF) = 1 + 0.8 (5 – 1) = 4.2% a) Is the portfolio defensive or aggressive. Why? b) If the actual portfolio return is 6%, what is the portfolio’s alpha?APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1 = 0.7 and bi2 = 0.9, what is Crisp’s required return?If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A) Expected Portfolio Return. 18% 18% A Market (8) Expected Standard Portfolio Return Deviation 219 168 A Market C) Expected Portfolio Return 218 168 A Market D) Portfolio A Market Beta 1.1 1.0 Expected Return 27.14 18% 118 198 Beta 1.1 1.0 Beta 1.7 1.0