The following graph shows the Security Market Line in the current economy. If a stock has a β of 1.2, what is the expected return of this stock based on the CAPM? (Please answer in % and round to 2 decimal places. If the answer is 8.057%, then in the box, write 8.06)
Read DetailsThe Market excess returns is while the risk free rate is The following table summarizes the promised returns and market exposure of two funds. Which fund manager is the better stock picker? Fund Expected return β Fund X 11.6% 1.2 Fund Y 9.1% 0.8
Read DetailsSuppose that the covariance between a stock and the market portfolio is 0.06 and that the standard deviation of the market portfolio is 0.30. Suppose also that the standard deviation of the stock’s returns is 0.55. Based on the CAPM, what is β of this stock? (Please answer as a number and round to 2 decimal places. If the answer is 0.768, then in the box, write 0.77)
Read DetailsThe scatter plots below depict the relation between excess returns of two stocks and the market excess return. In each graph, the market excess return is on the x-axis and the stock excess return is on the y-axis. The dashed line is estimated using a single-variable linear regression and represents the best linear fit: Which stock has higher α?
Read DetailsThe scatter plots below depict the relation between excess returns of two stocks and the market excess return. In each graph, the market excess return is on the x-axis and the stock excess return is on the y-axis. The dashed line is estimated using a single-variable linear regression and represents the best linear fit: f you are trying to find these two stocks on the Security Market Line, Stock B is located
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