Beta for each stock based on the actual observations

Assignment Help Financial Management
Reference no: EM131893184

Concider stocks X and Y

Stock X, Expected Return 0.18, Standard Deviation 0.06, Covariance with market portfolio 0.00108

Stock Y, Expected Return 0.12, Standard Deviation 0.02, Covariance wht market portfolio 0.00036

The correlation between stocks X an Y is 0.2 and the risk-free rate of return is 8%. The market risk premium is 7% and the market porfolio has a standard deviation of 3%.

Calculate the beta for each stock based on the actual observations?

Reference no: EM131893184

Questions Cloud

Response to expected run-up in stock market : Assume that you are about to select a specific stock that will perform well in response to an expected run-up in the stock market.
Calculate dividend payout ratio and retention ratio : Calculate dividend payout ratio and retention ratio for your chosen company.
What is company WACC if all equity is from retained earnings : The target capital structure consists of 40% debt and 60% common equity. What is the company’s WACC if all equity is from retained earnings?
The before-tax cost of debt-after tax cost of debt : The before-tax cost of debt is_____ the after tax cost of debt.
Beta for each stock based on the actual observations : Calculate the beta for each stock based on the actual observations?
What is the total cash flow in year six of this project : Hollister & Hollister is considering a new project. What is the total cash flow in year 6 of this project?
What was the time of the loan : If he paid back a $6,800 loan with $20 interest at 7.5%, what was the time of the loan?
Company wacc if all the equity used is retained earnings : The target capital structure cosists of 23% debt and 77% common equity. What is the company WACC if all the equity used is retained earnings?
Specializes in buying deep discount bonds : Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value.

Reviews

Write a Review

Financial Management Questions & Answers

  What are the IRRS of the two projects

You are choosing between two projects. The cash flows for the project are given in the following table ($ million) : What are the IRRS of the two projects? Why do IRR and NPV rank the two projects differently?

  Replacing an entire baking line

A Lotta Bread Corp. is replacing an entire baking line that was purchased for $420,000 and currentlyhas a book value of $60,000.

  What must be the one-year forward exchange rate

If the interest rate in the United Kingdom is 7 percent, the interest rate in the United States is 8 percent, the spot exchange rate is $1.742/£1, and interest rate parity holds, what must be the one-year forward exchange rate?

  Make appropriate use of case law-academic journal articles

Until the company has been incorporated it cannot contract or do any other act. Make appropriate use of case law and academic journal articles.

  Market value of the loan investment

An insurance company issued a $109 million one-year, zero-coupon note at 9 percent add-on annual interest (paying one coupon at the end of the year) and used the proceeds plus $29 million in equity to fund a $138 million face value, two-year commerci..

  Recommendation to purchase upstart software

Obsolete Computer Systems, Inc. wants to emerge as a major producer of computer software. The company has two options: Either it can purchase Upstart Software for $25m now whose products are expected to survive 5 years. As a member of Obsolete’s boar..

  Suppose microsoft projected free cash flow

Suppose Microsoft projected free cash flow for next year is FCF = $8.75 billion, and due to expected lower revenues and slower growth sales FCF is expected to grow at a constant rate of only 4.5% into the infinite future. The company’s weighted avera..

  Expected return on the investment with a beta

The expected return on the S&P 500 is 10% and the risk-free rate is 3%. What is the expected return on the investment with a beta of (a) 0.2, (b) 0.5, and (c) 1.4?

  Models parameters on the difference in net present value

The Executive Committee of PLE is debating whether to replace its original tractor model, the PLE-Classic, with a new model, the PLE-Tough, which would appeal to a younger clientele. Whatever tractor chosen will be produced for the next 4 years, afte..

  What is the bond nominal yield to call

Walker Industries has a bond outstanding with 12 years to maturity, a 9% coupon paid annually, and a $1,000 par value. The bond has a 7% nominal yield to maturity, but it can be called in 4 years at a price of $1,025. What is the bond’s nominal yield..

  Equity investment of this level of risk

How much are you willing to pay for one share of this stock if you want to earn 12.5 percent on an equity investment of this level of risk?

  What must the beta of this stock be

A stock has an expected return of 14%, the risk-free rate is 6%, and the market risk premium is 10%. What must the beta of this stock be?

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