3. Using Beta. A stock with a beta of .8 has an expected rate of return of 12%. If the market return this year turns out to be 5 percentage points below expectations, what is your best guess as to the rate of return on the stock? (LO12-1) 4. Specific versus Market Risk. Figure 12.11 shows plots of monthly rates of return on three stocks versus the stock market index. (The plots are similar to those in Figure 12.2.) The beta and standard deviation of each stock are given beside its plot. (LO12-1) a. Which stock is safest for a diversified investor? b. Which stock is safest for an undiversified investor who puts all her funds in one of these stocks? c. Consider a portfolio with equal investments in each stock. What would this portfolio’s beta have been? d. Consider a well-diversified portfolio made up of stocks with the same beta as Intel. What are the beta and standard deviation of this portfolio’s return? The standard deviation of the markket portfolio’s return is 20%. e. What is the expected rate of return on each stock? Use the capital asset pricing model with a market risk premium of 8%. The risk-free rate of interest is 4%. 8. Portfolio Risk and Return. According to the CAPM, would the expected rate of return on a security with a beta less than zero be more or less than the risk-free interest rate? Why would investors invest in such a security? (Hint: Look back to the auto and gold example in Chapter 11.) (LO12-1) 9. Risk and Return. Suppose that the risk premium on stocks and other securities did, in fact, rise with total risk (i.e., the variability of returns) rather than just market risk. Explain how investors could exploit the situation to create portfolios with high expected rates of return but low levels of risk. (LO12-2) 14. Expected Returns. Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. (LO12-2) Rate of Return Scenario Market Aggressive Stock A Defensive Stock D Bust ?8% ?10% ?6% Boom 32 38 24 a. Find the beta of each stock. In what way is stock D defensive? b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c. If the T-bill rate is 4%, what does the CAPM say about the fair expected rate of return on the two stocks? d. Which stock seems to be a better buy on the basis of your answers to parts (a), (b), and (c)?Best online assignments help service
We undertake all types of assignment for all educational levels.
Let us know about the assignment help required along with any details provided by the college or university.
Once you place your order, we send a confirmation to your email along with the payment process and details.
As soon as you proceed with the payment, the order becomes live on our server and we assign a vetted and shortlisted writer to your order.
We always complete the order based on the requirements provided by you and deliver before the deadline to give you time to review the order.
At eTutorConnect, we always ensure our clients get what they deserve i.e. the best services in the market. All our work is followed by the following guarantees
All our work is 100% original and not plagiarized. We use effective tools to verify the originality of content for your security.
Our money back policy ensures that your money is safe and secure and will be refunded in an event you are not satisfied with our services..
We maintain a strict confidentiality clause and never reveal the identity of our clients. Your transaction with us will remain safe and secure..
We understand the time constraints and always deliver our tasks on time for your peace of mind.
At eTutorConnect, we are dedicated to providing students with the best possible academic support. Our team of expert writers is here to offer a wide range of services, including assignment help, tutor help, essay help, and homework help.
eTutorConnect is one of the best academic help solution provider that deals with all types of course works, essays, dissertations, assignments, case studies, thesis, article writing, argumentative essays, research articles, etc. We believe in sustaining long-term relationships with our clients and ensure they are always satisfied with our services. Here are some benefits of choosing us:
Great services! Their customer services are great and available 24*7. I raised my query at late night and I was impressed with the immediate response of the team members. I have received my project on my mentioned date. Highly recommend for all students!Click Here To View All
I have two words to explicate the writing services of Etutorconnect for their working ethics are accuracy and excellence. All my instructions were followed while drafting my academic papers. Get your high-quality customized papers at reasonable prices.Click Here To View All
If you ask me anything about Etutorconnect , I would say this website is the best educational platform for all students. I was excited for my very first project which I asked them to do. It was so well-composed with references and citations. Great work!Click Here To View All
All my friends and I are getting help from the homework market. It's every college student's best-kept secret!Click Here To View All
Sometimes, you could not find enough time to put your effort on writing worthy homework. So I decided to take help from Etutorconnect . Their writers prove my decision is the best decision for my academic work with their top quality and prodigious services.Click Here To View All
What an excellent work! I have been galvanized and contented with the way they completed my lab reports. Ever since I connected with your online writing services I have been getting nothing less than A grades in my work. Thanks for your valuable support and time.Click Here To View All
It was when my mother got ill, and I had to take care of her, then I decided to take Etutorconnect help. I opted for the services of etutorconnect. I asked to do my work in 2 days. Our professor asked us a proper rubric to be followed. I told them all. They followed my instructions properly. I liked the work which I receivedClick Here To View All
was not well from few days and due to which my economics homework was pending and i was not able to do it. One of my friends gave me an idea to take homework help from Etutorconnect. Tutors provided an informative work to me without late. All the answers were well written. Thanks to etutor connect writers.Click Here To View All
If you are looking for a legitimate homework help service, then trust me guys, you cannot find anything better than etutorConnect is the best place.Click Here To View All
This assignment help service provider was recommended to me by a friend. I used their WhatsApp number to contact them. I am overwhelmed with the response and the work that they provided. Keep it upClick Here To View All
I ordered my Marketing assignments to these guys. At the first moment I was reluctant to pay them. However, they offered me a deal to pay only a small part of the payment and they will provide me a draft of work. If I will like it, then I can order for the rest. The work was indeed amazing. Etutor-connect good going.Click Here To View All