Access over 20 million homework & study documents

search

1 ) What does Beta () measure and reflect2 ) Consider the followi

Content type
User Generated
Rating
Showing Page:
1/2
1.) What does Beta () measure and reflect?
2.) Consider the following: A firms operations are 45%
GREATER than an average firm in the market. Relevant
government securities trade @ 3.7%; and the current
average return on the market as a whole is 9.1%. What
rate of return must the firm pay to attract investors?
3.) How does your answer to 2. above change if the
companys operations stabilize and its risk relative to the
market goes down to 110%; AND the expected return on
the market GOES DOWN to 7.9%?
4.) Consider the following information:
State of Prob of State Rate of Return if State
Occurs
Economy of Economy Stock A Stock B
Stock C
Boom .35 .07
.15 .33
Bust .65 .13 .03 -.06
What is and expected return and variance of a portfolio
which is equally weighted in investments of each of the
three stocks?
Solution
1. Beta is a measure of systematic risk or market related
risk or sensitivity of stock or sensitivity of portfolio in
relation to sensitivity of market.. Beta is computed in
times. Beta implies the number of times the portfolio

Sign up to view the full document!

lock_open Sign Up
Showing Page:
2/2

Sign up to view the full document!

lock_open Sign Up
Unformatted Attachment Preview
1.) What does Beta () measure and reflect? 2.) Consider the following: A firm’s operations are 45% GREATER than an average firm in the market. Relevant government securities trade @ 3.7%; and the current average return on the market as a whole is 9.1%. What rate of return must the firm pay to attract investors? 3.) How does your answer to 2. above change if the company’s operations stabilize and its risk relative to the market goes down to 110%; AND the expected return on the market GOES DOWN to 7.9%? 4.) Consider the following information: State of Prob of State Rate of Return if State Oc ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
I use Studypool every time I need help studying, and it never disappoints.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4