Levels Tought:
Elementary,Middle School,High School,College,University,PHD
Teaching Since: | May 2017 |
Last Sign in: | 307 Weeks Ago, 4 Days Ago |
Questions Answered: | 66690 |
Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
NOTE: NO PARTIAL CREDIT WILL BE GIVEN TO ANSWERS SHOWING NO WORK (25 pts) Given the following information, = 0.06, E() = 0.12, = 0.15, answer the following questions.What is the numerical value of the equilibrium market risk premium (that is, the excess return on the market portfolio)?What is the equilibrium expected return on a risky asset with aof 1.2? With a of 0.6?What is theof a security with an equilibrium expected return of 0.03?Is it possible in equilibrium for the expected return on a risky security to be less than the risk-free rate?(25 pts) You are given the following two equations: (1) (2)You also have the following information: E() = 0.15, = 0.06, = 0.15. Answer the following questions, assuming that the capital asset pricing model is correct:Which equation of the two equations given above would you use to determine the expected return on an individual security with a = 2? Given the parameters above, what is the expected return for security i?Suppose that for security i, standard deviation of returns =.5. Which equation would you use to determine the expected return on a portfolio knowing that it is an efficient portfolio (consisting of the market portfolio M combined with the risk-free asset)? If you were told that the standard deviation of returns on that portfolio is same as the standard deviation of the market portfolio, and you were given the above parameters, what is the expected return on that portfolio?Can you determine theof the portfolio in (b)?(25 pts) Suppose that the relevant equilibrium model is the CAPM with unlimited borrowing and lending at the risk-free rate. The expected market return is 12.17%. Fill in the five blanks in the following table:Asset Annual Annual Beta Correlation coefficient Expected Return Std. Dev. with the market portfolioA 10.5% _____ 0.40 30%B ___ 32% ...
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