The following data have been developed for the Donovan Company: Probability of State of Nature State of Nature Market Return, Rm Return for the Firm, Rj 0.10 1 -0.15 -0.30 0.30 2 0.05 0.00 0.40 3 0.15 0.20 0.20 4 0.20 0.50 The risk-free (Rf) rate is 6%. Calculate the following: (a) The covariance of the return for the Donovan Company with the market return. (b) What is the required return for the Donovan Company? How does this compare with its expected return? free rate is 6%, find the beta for a portfolio that has expected rate of return of 10%. (i). What percentage of this portfolio must an individual put into the market portfolio in order to achieve an expected return of 10%?
The following data have been developed for the Donovan Company: Probability of State of Nature State of Nature Market Return, Rm Return for the Firm, Rj 0.10 1 -0.15 -0.30 0.30 2 0.05 0.00 0.40 3 0.15 0.20 0.20 4 0.20 0.50 The risk-free (Rf) rate is 6%. Calculate the following: (a) The covariance of the return for the Donovan Company with the market return. (b) What is the required return for the Donovan Company? How does this compare with its expected return? free rate is 6%, find the beta for a portfolio that has expected rate of return of 10%. (i). What percentage of this portfolio must an individual put into the market portfolio in order to achieve an expected return of 10%?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The following data have been developed for the Donovan Company:
Probability of State
of Nature
State of Nature Market Return, Rm Return for the Firm, Rj
0.10 1 -0.15 -0.30
0.30 2 0.05 0.00
0.40 3 0.15 0.20
0.20 4 0.20 0.50
The risk-free (Rf) rate is 6%.
Calculate the following:
(a) The covariance of the return for the Donovan Company with the market
return.
(b) What is the required return for the Donovan Company? How does this
compare with its expected return?
free rate is 6%, find the beta for a portfolio that has expected rate of return
of 10%.
(i). What percentage of this portfolio must an individual put into the market
portfolio in order to achieve an expected return of 10%?
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