Solution-Calculate apple expected return

Calculate apple expected return

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Reference no: EM132795043

Problem (a) Describe the systematic and non-systematic risk components of the following financial assets:

i. 3-month US Treasury bill;

ii. Hang Seng Index (HSI) tracker fund with standard deviation (a total risk) of 20%.

Problem (b) Consider two investments, X and Y. Investment X has a beta of 1.10 and a standard deviation of 17%, all of which is systematic risk. Investment Y has a beta of 0.95 and a standard deviation of 30%, half of which is non-systematic risk. Which investment should have a higher expected rate of return? Explain your answer.

Problem (c) Mr. Jobs observes a strong demand for the new iPhones and plans to buy Apple stock. However, Mr. Jobs does not know what return he should expect from his investment. He does know that a risk-free rate is 2%, a market return is 10%, and Apple's stock beta is 1.20. Help Mr. Jobs and calculate Apple's expected return. Show your calculations.

Reference no: EM132795043

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Calculate apple expected return

Reference no: EM132795043

Reference no: EM132795043

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