Reference no: EM132848299
Questions -
Q1. Determine the total rate of return of an investment portfolio. If the risk-free rate is 4.5% and the expected rate of return of the market portfolio is 12%, with a beta of 0.78, if said security really obtains a return of 16%, is it overvalued or undervalued?
Q2. It is intended to buy a company that, it is believed, can generate expected cash flows of $ 10,000 in perpetuity. However, it knows that most of these cash flows are incorrect, so it is decided to determine the total return with the CAPM model and the following data is provided: A beta of the company is assumed to be 0.4.
a) How much is the company worth if the risk-free rate is 4.9% and the expected rate of return of the market portfolio is 13.6%?
b) If the beta is actually 0.6? Has the company been overvalued or undervalued and by how much?
Q3. Investors expect a risk-free rate of 4.05% this year. A stock with a beta of 1.1 has an expected return of 15%. Determine the total rate of return. If the return obtained was 13%, was it a good investment or not and why?
Q4. Calculate the total return rate of your shares using the CAPM. Assume that the risk-free interest rate is 4.25%. Apply a 9.5% risk premium to the market portfolio
Empresa Beta
América Móvil 0.31
Grupo Televisa 0.60
Apple 1.35
Facebook 1.27
Q5. A project with a beta coefficient of 1.15 is currently being considered. Right now, the risk-free rate of return is 4.32% and the expected return on the market asset portfolio is 11.8%.
a) Calculate the total rate of return according to the CAPM model.
b) If the return on the market portfolio obtained were 12%, what would you expect to happen with the required return on the project? What would happen if the return obtained from the market decreased to 10%?
c) According to the calculation you made in section a and considering the real yield of 12%, would you recommend this investment? Why?
d) Suppose that because investors have decreased their aversion to risk, the market return fell to 9%. What impact would this change have on your answers to part c as to whether and why you recommend the investment?
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