red There are two types of risk concerning the stock BCM. The total risk of stock BCM is 50% more than the risk for the stock market as a whole. However, the diversifiable risk of stock BCM is 90% higher than the stock market as a whole, whereas the undiversifiable risk of stock BCM is actually 20% less than the stock market as a whole. Assuming the risk free return is 5% and the expected return on the stock market as a whole is 9%, the expected return on stock BCM should be 11.0% 7.2% 8.2% ked 4.5%
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- An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?The stock of Jones Trucking is expected to return 16 percent annually with a standard deviation of 7 percent. The stock of Bush Steel Mills is expected to return 21 percent annually with a standard deviation of 13 percent. The correlation between the returns from the two securities has been estimated to be +0.4. The beta of the Jones stock is 1.1, and the beta of the Bush stock is 1.4. The risk-free rate of return is expected to be 6 percent, and the expected return on the market portfolio is 16 percent. The current dividend for Jones is $5. The current dividend for Bush is $7. What is the expected return from a portfolio containing the two securities if 30 percent of your wealth is invested in Jones and 70 percent is invested in Bush? Round your answer to one decimal place. % What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. % Which stock is the better buy in the current market? Round your answers to one decimal…The stock of Jones Trucking is expected to return 16 percent annually with a standard deviation of 7 percent. The stock of Bush Steel Mills is expected to return 21 percent annually with a standard deviation of 13 percent. The correlation between the returns from the two securities has been estimated to be +0.4. The beta of the Jones stock is 1.1, and the beta of the Bush stock is 1.4. The risk-free rate of return is expected to be 6 percent, and the expected return on the market portfolio is 16 percent. The current dividend for Jones is $5. The current dividend for Bush is $7. What is the expected return from a portfolio containing the two securities if 30 percent of your wealth is invested in Jones and 70 percent is invested in Bush? Round your answer to one decimal place. % What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. % Which stock is the better buy in the current market? Round your answers to one decimal…
- The market risk premium is 11.5 percent, and the risk-free rate of return is 3.75 percent. Assuming Amalgamated Industries has an expected return of 13.5 percent, what is the beta of this stock?The risk-free rate is 3 percent, the expected return on the PSEi is 13 percent, and its standard deviation is 23 percent. A local equity ABC stock, has a standard deviation of 50 percent but is uncorrelated with the market. Calculate ABC’s beta and calculate ABC’s expected return.The expected rate of return for the stock of Cornhusker Enterprises is 20 percent, with a standard deviation of 15 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 9 percent. a. Which stock would you consider to be riskier? Why? b. If you knew that the beta coefficient of Cornhusker stock is 1.5 and the beta of Mustang is 0.9, how would your answer to Part a change?
- Currently, the risk-free return is 3 percent, and the expected market rate of return is 9 percent. What is the expected return of the following three-stock portfolio? Account Invested Beta $350,000 1.0 $250,000 0.2 $400,000 2.5A stock has an required return of 18 percent, its beta is 02.25, and the risk-free rate is 2.75 percent. The expected return on the market must bePresently, the risk-free rate is 4 percent (Rf )and the expected return on the market portfolio (E(Rm))is 9 percent. Market analysts’ return expectations for four stocks are listed here, together with each stock’s beta. If the analysts’ expectations are correct, which stocks (if any) are overvalued? Which (if any) are undervalued? (Hint: You need to calculate the required return on each stock) Stocks Expected Return Beta Required Rate Return Underpriced? Overpriced? Or Correctly Priced? 1. General Motors (GM) 5.10% 1.2 2. McDonald's Corp (MCD) 7.60% 0.72 3. Boeing Company (BA) 13.20% 1.5
- Presently, the risk-free rate is 4 percent (Rf )and the expected return on the market portfolio (E(Rm))is 9 percent. Market analysts’ return expectations for four stocks are listed here, together with each stock’s beta. If the analysts’ expectations are correct, which stocks (if any) are overvalued? Which (if any) are undervalued? (Hint: You need to calculate the required return on each stock. Stocks Expected Return Beta Required Rate Return Underpriced? Overpriced? Or Correctly Priced? 1. General Motors (GM) 5.10% 1.2 2. McDonald's Corp (MCD) 7.60% 0.72 3. Boeing Company (BA) 13.20% 1.5 Tom constructs his own stocl portfolio that has 50% of the fund invested in Stock GM, 25% of the fund invested in Stocks MCD and BA, each. Caculate the portfolio's beta.You are holding a stock which has a beta of 2.0 and is currently in equilibrium. The required return on the stock is 15 percent, and the return on an average stock is 10 percent. What would be the percentage change in the return on the stock if the return on an average stock increased by 30 percent while the risk-free rate remained unchanged?Currently, the risk free return is 5 percent and the expected market rate of return is 12 percent. What is the expected return of the following three-stock portfolio? Amount invested Beta P400,000 1.5 500,000 2.0 100,000 4.0