Calculate beta is to take the covariance

Assignment Help Finance Basics
Reference no: EM131126403

Show that another way to calculate beta is to take the covariance between the security and the market and divide by the variance of the market’s return.

Reference no: EM131126403

Questions Cloud

Decompose the stock return into the systematic return : The beta for a certain stock is 1.15, the risk-free rate is 5 percent, and the expected return on the market is 13 percent. Complete the following table to decompose the stock's return into the systematic return and the unsystematicreturn.
Which stock has the most systematic risk : The market risk premium is 8 percent, and the risk-free rate is 5 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is "riskier"?Explain.
How much money will you invest in stock y : If X has an expected return of 31 percent and a beta of 1.8, Y has an expected return of 20 percent and a beta of 1.3, and the risk-free rate is 7 percent, how much money will you invest in Stock Y? How do you interpret your answer?
Use this information to calculate the security beta : Fill in the following table, supplying all the missing information. Use this information to calculate the security'sbeta.
Calculate beta is to take the covariance : Show that another way to calculate beta is to take the covariance between the security and the market and divide by the variance of the market’s return.
What is the expected return on the market : Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-freerate?
If the risk-free rate is 6 percent and the market risk : Stock Y has a beta of 1.25 and an expected return of 14 percent. Stock Z has a beta of .70 and an expected return of 9 percent. If the risk-free rate is 6 percent and the market risk premium is 7 percent, are these stocks correctly priced?
Illustrate the relationship between portfolio expected retur : Illustrate the relationship between portfolio expected return and portfolio beta by plotting the expected returns against the betas. What is the slope of the line thatresults?
What is the expected return on a portfolio that is equally : a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of .5, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 12 percent, ..

Reviews

Write a Review

 

Finance Basics Questions & Answers

  What is the current share price

Apocalyptica Corp. pays a constant $8.30 dividend on its stock. The company will maintain this dividend for the next 14 years and will then cease paying dividends forever. If the required return on this stock is 12 percent, what is the current sha..

  What is the present estimation of lakshmi limited

What is the present estimation of Lakshmi Limited's value, S0, and obligation, B0?

  Distribution from stock bonus plan

Randy, age 63, is a participant in the stock bonus plan of XYZ, Inc.,  Which of the following correctly describes Randy's tax consequences in year 6 from this distribution if Randy does not sell the XYZ stock until year 8?

  Why are companies required to prepare a statement of cash

why are companies required to prepare a statement of cash flows? why is the statement of cash flows divided into three

  Te companys debt-to-equity ratio has increased

youre interested in investing in the peters company which has shown a remarkable increase in eps over the last three

  What is the amount of the firm disbursement float

In addition, the firm generally receives an average of $16,400 a day in checks. Deposited amounts are available after 2 days. What is the amount of the firm's disbursement float?

  What is the amount the firm should use as the initial cash

What is the amount the firm should use as the initial cash flow attributable to net working capital when it analyzes this project?

  Saunders corp has a book net worth of 13405 long-term debt

saunders corp. has a book net worth of 13405. long-term debt is 8600. net working capital other than cash is 3235.

  What is the value of a share of stock

A firm paid a $3.00 dividend last year and dividends are expected to grow at 15% for the next 5 years and 5% thereafter. If the required return is 13%, what is the value of a share of stock?

  Enterprise or systemic risk

What are the typical major asset and liability categories on a bank's balance sheet; comment on debt to equity level as compared to other corporate balance sheets you might have viewed?

  Describe and explain the relationship between goals of a

1 describe and explain the various forces that affect trading in international markets. what are the advantages and

  What is the break-even lease rate—that is what lease amount

What is the break-even lease rate—that is, what lease amount could P&G pay each year and be indifferent between leasing and financing a purchase?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd