On average, IPOs of firms tend to perform ________ over a period of a year or longer. Question 24 options: well poorly about the same as the S\&P 500 index
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On average, IPOs of firms tend to perform ________ over a period of a year or longer.
Question 24 options:
|
|
well |
|
|
poorly |
|
|
about the same as the S\&P 500 index |
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- A. If a stock costs $55 one month and drops to $45 the next month, what is the expected stock price the next month, if we assume the stock follows a random walk? B. Explain both technical and fundamental analysis and what form of the efficient market hypothesis corresponds to each.1. Considering the following information for stock K and stock M. Probability of state of economy State of economy Boom Normal Recession 0.3 0.5 0.2 Rate of return if state occurs K 25% 15% -12% M 18% 4% 0% 1) What is the expected return for stock K? For Stock M? 1) What is the standard deviation for Stock K" For stock M? iii) What is the coefficient of variation for Stock K? For stock M2 iv) If you invest 60% of your money in stock K and 40% in stock M, what is the expected return of the portfolio v) Find the return of your portfolio when a) economy is booming, b) economy is normal; and c) recession occurs vi) What is the standard deviation for your portfolio? (18 points in total)Year AT&T Stock Returns Market Index Returns 1 8 6 2 7 3 3 10 12 4 14 13 5 8 9 The equation of the characteristic line for AT&T is: Group of answer choices Return = 0.538 + 0.9200*Market Return Return = -3.089 + 1.2436*Market Return Return = 0.813 + 0.6530*Market Return Return = 0.471 + 0.0311*Market Return Return = 4.578 + 0.5607*Market Return
- REQUIRED RATE OF RETURN Suppose rr = 9%, ry = 14%, and b, = 1.3. a. What is r, the required rate of return on Stock i? b. Now suppose that rE (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this affect r and r? 8-12 Now assume that rp remains at 9%, but (2) falls to 13%. The slope of the SML does not remain constant. How would these changes affect r,? C. (1) increases to 16% or37. An analyst developed the following probability distribution of the rate of return for a common stock: Rate of return Scenario Recession -0.05 0.10 0.25 What's the standard deviation of the rate of return? Show your calculations. n k=ZkP |o= i=1 A. 0.0549. B. 0.0649. Normal Boom . 0.0749. D. 0.0849 E. 0.0949. 건 Probability 0.20 0.60 0.20 i-1 (k₂ − Ê)² P₂.Suppose you observe the following situation: Economy Bust Normal Boom state 0.35 0.55 0.10 Stock A Stock B Return if state occurs Stock A -0.12 0.09 0.44 a. Calculate the expected return on each stock. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Stock B -0.10 0.09 0.24 Expected return b. Assuming the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by 0.30, what is the expected market risk premium? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Expected market risk premium %
- 46 If the return on the market portfolio is 10% and the risk-free rate is 5%, what is the effect on a company's required rate of return on its stock of an increase in the beta coefficient from 1.2 to 1.5? Group of answer choices 1.5% increase 1.5% decrease No change 3% increaseAssume that you are using the Capital Asset Pricing Model (CAPM) to find the expected return for a share of common stock. Your research shows the following: Beta = βi = 1.54 Risk free rate = Rf = 2.5% per year Market return = E(RM) = 6.5% per year Based on this information, answer the following: A. Based on the beta, how does the stock's risk compare to the market overall? On what do you base your answer? B. Based on the beta, how would you expect the stock's returns to react to a decrease in returns in the market overall? Why? C. According to the CAPM and the information given above, what is the expected return E(Ri) for this stock? D. If the required rate of return on this stock were 7% per year, would you invest? Why or why not?Consider two stocks, A and B, whose returns in a boom and a recession are given below. Stock A: recession (-15%), boom (+20%). Stock B: recession (+10%), boom (-2%). Suppose that there is a 10% chance of a recession next year. 25.53% should be allocated in stock A and 74.47% in stock B to minimize the risk. Are you able to perfectly eliminate your risk?
- Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return Strong 0.15 20 % Normal 0.55 9 % Weak 0.30 -5 % What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places.. E(RI) = .15(.11) + .55(.18) + .30(.08) Using CAPM to determine the expected rate of return for risky assets, consider the following example stocks, assuming that you have already compute the betas Stock Beta WND 0.80 STA 1.35 CTE 1.15 DUY 1.20 EVN -0.20 Stock WND the economy’s RFR to be 6 percent (0.06) and the expected return on the market portfolio (E(RM)) to be 8 percent (0.08) Stock STA, the economy’s RFR to be 5percent (0.05) and the expected return on the market portfolio (E(RM)) to be 7 percent(0.07) Assume that all the other stocks is as follows since we expect the economy’s RFR to be 5 percent (0.05) and the expected return on the market portfolio (E(RM)) to be 9 percent (0.09),Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return Strong 0.25 21 Normal 0.55 8 Weak 0.20 -5 What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places. ____% What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places. ____% What is the stock's coefficient of variation? Round your answer to two decimal places. Do not round intermediate calculations. ____
