Idiosyncratic risk of the stock, Financial Accounting

Assignment Help:

(a)   The market considers Intel Corp (INTC) of all these stocks to be the riskiest since it has the highest beta of 1.497408. No, this measure of risk does not include the idiosyncratic risk of the stock. The idiosyncratic error will be included in the ε item in the market model of each stock.

(b)  Intel Corp (INTC) had price changes that were least closely related to the market, because it has the highest beta and hence more variation from the returns of S&P.

(c)   Apple (AAPL) has the highest expected returns. The average monthly return for this stock is 0.0234130, which is the highest of all stocks and this occurs even when the index returns are zero or flat.

(d)  With the given information and the given equation,

Expected return of HD = 0.0195538 + 1.089703*10% = 0.128524 = 12.8524%

Thus the expected return of HD is 12.8524% for the next month, with the given predictions (ignoring error term).

 


Related Discussions:- Idiosyncratic risk of the stock

Calculate the cash flow-agency costs, Tom Scott is the owner, president, an...

Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40

Prepare the journal entry at december 31, On December 31, 2004, Internation...

On December 31, 2004, International Refining Company purchased machinery having a cash selling price of $85,933.75. The company paid $10,000 down and agreed to finance the remainde

Is the emergency center a wise use of the hospital''s , Consider a not-for-...

Consider a not-for-profit hospital faced with a familiar choice: to open or not to open an emergency center in a new suburban hospital shopping mall.  The mall's developers claim t

Determine total financial liabilities, From the end of January to the end o...

From the end of January to the end of December 2010, the XYZ Company experienced the following changes in its assets and liabilities of interest: the company achieved a saving posi

Nikki., Trying to calculate earnings per share. Is net income the same as ...

Trying to calculate earnings per share. Is net income the same as earnings before interest and taxes?

Compute the present value, Q. Compute the present value? The offer for...

Q. Compute the present value? The offer for the manufacturing rights is for a ten-year period. Annual after-tax cash flow after Year 4 = $660000 Present value of this c

Basis of npv and irr, Suppose that Oxford Inc. is interested in the two new...

Suppose that Oxford Inc. is interested in the two new products, AME and CGK. Because of its capital budget constraint, it can only launch one new product line. Eric just graduated

Need help completing self assessment return, I am an AAT student studying l...

I am an AAT student studying lvl 3 AAT at college. I wish to learn how to complete self assessment end of year tax return forms for other people. That is because I have already bee

Users of accounting, How is Accounting information useful to A prospective ...

How is Accounting information useful to A prospective Investor?

the rate of interest on the gold is too high or too low, Suppose you are ...

Suppose you are a financial manager of Yuen Cheong Manufacturng Company. Due to the rising demand of product X, Yuen Cheong Manufacturng Company decides to open a new production pl

Write Your Message!

Captcha
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