Question 1-1
Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation coefficient with the market of -0.3, and a beta coefficient of -1.5. Security B has an expected return of 12%, a standard deviation of returns of 10%, a correlation with the market of 0.7, and a beta coefficient of 1.0. Which security is riskier? Why?
Problem 1-2
Assume the risk-free rate is 6% and that the expected return on the market is 13%. What is the required rate of return on a stock that has a beta of 0.7?
Problem 1-3
Suppose rRF = 5% rM = 10%, and rA = 12%
Calculate stock Aâs beta.
If stock Aâs beta were 2.0, then what would be Aâs new required rate of return?
Please forgive me, I posted the first part of this question (the main body) but forgot to post the rest of the question. So here is the full question. Thank you.
Question 1-1
Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation coefficient with the market of -0.3, and a beta coefficient of -1.5. Security B has an expected return of 12%, a standard deviation of returns of 10%, a correlation with the market of 0.7, and a beta coefficient of 1.0. Which security is riskier? Why?
Problem 1-2
Assume the risk-free rate is 6% and that the expected return on the market is 13%. What is the required rate of return on a stock that has a beta of 0.7?
Problem 1-3
Suppose rRF = 5% rM = 10%, and rA = 12%
Calculate stock Aâs beta.
If stock Aâs beta were 2.0, then what would be Aâs new required rate of return?
Please forgive me, I posted the first part of this question (the main body) but forgot to post the rest of the question. So here is the full question. Thank you.
