Consider the following indevelopment and also then calculate the compelled rate of return for the Global Investment Fund, which holds 4 stocks. The market"s compelled price of rerevolve is 13.25%, the risk- complimentary price is 7.0%, and also the Fund"s assets are as follows:Stock....... Investment.......Beta.A ................\$ 200,000..........1.50B.................\$ 300,000..........-0.50C.................\$ 500,000............1.25D.................\$1,000,000...........0.75
*****rM 13.25%rRF 7.00%Find Portfolio beta: ......................Weight.........Beta.........Product \$ 200.000.....0.100............1.50...........0.1500 \$ 300.000.....0.150...........-0.50.........-0.0750 \$ 500.000.....0.250...........1.25............0.3125 \$ 1.000.000...0.500..........0.75............0.3750TOTAL:\$ 2.000.000...1.000...............................0.7625 → portfolio beta→ Find RPM = rM - rRF = 6.25% rS = rRF + b(RPM) = 11.77%
Assume that you hold a well- diversified portfolio that has an meant rerotate of 11% and also a beta of 1.20. You are in the procedure of buying 1.000 shares of Alpha Corp. at 10\$ a share and adding it to your portfolio. Alpha has actually an meant rerotate of 13.0% and a beta of 1.50. The full value of your current portfolio is \$90.000. What will certainly the intended return and also beta on the portfolio be after the purchase of the Alpha stock?a. 10.64%; 1.17b. 11.20%; 1.23c. 11.76%; 1.29d. 12.35%; 1.36e. 12.97%; 1.42
If in the opinion of a offered investor a stock"s expected rerevolve exceeds its compelled rerotate, this says that the Investor thinks:a. the stock is enduring supernormal growth.b. the stock need to be offered.c. the stock is a good buy.d. management is most likely not trying to maximize the price per share. e. dividends are not likely to be asserted.

You are watching: A stock has a required return of 11

Which of the complying with statements is most correct?a. A two-stock portfolio will constantly have actually a reduced conventional deviation than a one-stock portfolio.b. A two-stock portfolio will certainly constantly have actually a reduced beta than a one-stock portfolio.c. if portfolios are formed by randomly selecting stocks, a 10-stock portfolio will always have actually a lower beta than a one-stock portfolio.d. every one of the statements above are correct.e. namong the statements over is correct.
Which of the complying with statements is the majority of correct?a. Portfolio diversification reduces the varicapacity of the retransforms on the individual stocks organized in the portfolio.b. If an investor buys sufficient stocks, he or she can, via diversification, remove practically every one of the nonsector (or company-specific) threat natural in owning stocks. Undoubtedly, if the portfolio contained all publicly traded stocks, it would be riskless.c. The compelled rerevolve on a firm"s common stock is established by its methodical (or market) danger. If the organized threat is known, and if the risk is meant to remain constant, then no various other information is forced to specify the firm"s required rerotate.d. A security"s beta procedures its non diversifiable (organized, or market) threat loved one to that of an average stock.e. A stock"s beta is less appropriate as a meacertain of danger to an investor through a well-diversified portfolio than to an investor that holds only that one stock.

See more: Let'S Play Story Of Seasons Trio Of Towns Winery, I Really Need Wine!

. A stock i has has actually a required rerotate of 11%. The risk- totally free rate is 7%, and also the market danger premium is 4%. What"s the stock"s beta?
Conditions........Probability.......ReturnProbcapacity x ReturnGood .......................0.25...............................30% ...................7.5%Median ..................0.50 ..............................12% ....................6.0%Poor ..........................0.25 .............................-18% .................-4,5% Total:..........................1.00 ...........................................................9.0% - Expected Return
Dothan Inc."s stock has a 25% chance of developing a 30% rerotate, a 50% possibility of creating a 12% rerotate, and also a 25% opportunity of creating a -18% return. What is the firm"s expected price of return?
You observe the following information regarding Companies X and also Y:-agency X has actually a higher intended return than company Y-agency X has a lower conventional deviation of returns than agency Y.-Company type of X has a higher beta than Company type of Y. Given this information, which of the complying with statements is CORRECT?a. company X has actually more diversifiable risk than Company kind of Y. b. Company kind of X has actually a lower coeffective of variation than Company kind of Y. c. Company X has much less industry danger than Company Y. d. Company type of X"s returns will certainly be negative once Y"s returns are positive. e. Company kind of X"s stock is a better buy than Company type of Y"s stock.
Calculate the compelled price of rerotate for Mercury Inc., assuming that investors mean a 5% price of inflation in the future. The genuine risk-complimentary price is equal to 3% and also the market danger premium is 5%. Mercury has actually a beta of 2 and also its realized price of rerotate has actually averaged the 25% over the last 5 years. a. 15%b. 16%c. 17%d. 18%e. 20%
The meant rerotate on the portfolio is 8.82%.The new portfolio will certainly consist of 10 million of the old portfolio, and 5 million of the brand-new stock. Due to the fact that portfolio rerevolve is the weighted average of the rerevolve on the portfolio and also the return on the new stock, we first need to compute the meant rerotate on the old portfolio and also the new stock.The return on the old portfolio is given and also is 9.5%. We can use the capital ascollection pricing version to compute the intended rerotate on the new stock. According to CAPM, expected rerotate = danger free price + beta * market danger premium.First we usage the rerevolve information on the old portfolio to compute the industry threat premium = (supposed rerevolve - hazard free rate ) / beta = (9.5% - 4.2%) / 1.05 = 5%.Next off we use the CAPM to compute the supposed rerotate on the new stock: intended rerevolve = 4.2% + 0.65*5% = 7.45%.The supposed rerotate on the portfolio = (10 9.5% + 5
7.45%) / (10 + 5) = 8.82%.Assume that you manage a \$10.00 million mutual fund that has a beta of 1.05 and a 9.50% forced rerevolve. The risk-cost-free price is 4.20%. You now receive another \$5.00 million, which you invest in stocks via an average beta of 0.65. What is the compelled price of rerotate on the brand-new portofolio? (Hint: You need to initially find the market danger premium, then uncover the brand-new portofolio beta.)
Assume that you regulate a \$10.00 million shared fund that has actually a beta of 1.05 and also a 9.50% forced rerevolve. The risk-free rate is 4.20%. You currently obtain one more \$5.00 million, which you invest in stocks with an average beta of 0.65. What is the forced price of return on the brand-new portofolio? (Hint: You must first find the market threat premium, then find the brand-new portofolio beta.)
})}else;home window.area.assign("https://muzic-ivan.info/explanations/textbook-solutions/krugmans-economics-for-ap-2nd-edition-9781464122187");">

})}else;home window.area.assign("https://muzic-ivan.info/explanations/textbook-solutions/principles-of-economics-8th-edition-9781305585126");">

})}else;home window.area.assign("https://muzic-ivan.info/explanations/textbook-solutions/contemporary-economics-9780538437004");">

})}else;window.place.assign("https://muzic-ivan.info/explanations/textbook-solutions/essentials-of-investments-7th-edition-9780073405179");">

Essentials of Investments7th EditionZvi Bodie
400 explanations
Sets found in the same folder