100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
ch8 Question and answer already passed $13.49
Add to cart
Quickly navigate to
Preview
  2.  
  3. GARP
  4.  
  5. GARP

Exam (elaborations)

ch8 Question and answer already passed

 0 purchase
  • Course
  • GARP
  • Institution
  • GARP

ch8 Question and answer already passed ch. 10 and 11 The common stock of Flavorful Teas has an expected return of 18.56 percent. The return on the market is 14 percent and the risk-free rate of return is 2.6 percent. What is the beta of this stock? - correct answer 18.56% = 2.6% + Beta × (14%...

[Show more]

Preview 2 out of 5  pages

Document information

  • August 11, 2024
  • 5
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • ch8
  • ch8 question and answer already passed

Written for

  • GARP
  • GARP

Seller

avatar-seller
Academia199

Reviews received

Content preview

ch. 10 and 11
The common stock of Flavorful Teas has an expected return of 18.56 percent.
The return on the market is 14 percent and the risk-free rate of return is 2.6
percent. What is the beta of this stock? - correct answer ✔18.56% = 2.6% +
Beta × (14% - 2.6%)
18.56% - 2.6% = Beta × (14% - 2.6%)
15.96% = Beta × 11.4%
Divide both sides by 11.4%:
(15.96% / 11.4%) = Beta
Beta ≈ 1.40


There is 14 percent probability of recession, 11 percent probability of a poor
economy, 47 percent probability of a normal economy, and 28 percent
probability of a boom. A stock has returns of −19.6 percent, 3.2 percent, 11
percent, and 26.7 percent in these states of the economy, respectively. What
is the stock's expected return? - correct answer ✔Probability times returns.
Then add them all up.


You own a portfolio that has a total value of $270,000 and it is invested in
Stock D with a beta of .73 and Stock E with a beta of 1.50. The beta of your
portfolio is equal to the market beta. What is the dollar amount of your
investment in Stock D? - correct answer ✔BP= (WD x BD) + (WE x BE)


Then 1= (1-WE) BD + (WE x BE)


Final answer subtract by one to get Weight D. Multiply by total value.


Beta - correct answer ✔a measure of the volatility—or systematic risk—of a
security or portfolio compared to the market as a whole

, The expected return on HiLo stock is 14.75 percent while the expected return
on the market is 13.7 percent. The beta of HiLo is 1.25. What is the risk-free
rate of return? - correct answer ✔9.5%


A bond had a price of $945.32 at the beginning of the year and a price of
$975.43 at the end of the year. The bond's par value is $1,000 and its coupon
rate is 4.1 percent. What was the percentage return on the bond for the year?
- correct answer ✔7.52%


You have a portfolio worth $83,500 that has an expected return of 11.1
percent. The portfolio has $17,700 invested in Stock O, $25,500 invested in
Stock P, with the remainder in Stock Q. The expected return on Stock O is
15.4 percent and the expected return on Stock P is 12.1 percent. What is the
expected return on Stock Q? - correct answer ✔8.58%


Your portfolio has a beta of 1.54. The portfolio consists of 16 percent U.S.
Treasury bills, 34 percent Stock A, and 50 percent Stock B. Stock A has a risk
level equivalent to that of the overall market. What is the beta of Stock B? -
correct answer ✔2.40%


You decide to invest in a portfolio consisting of 30 percent Stock A, 30 percent
Stock B, and the remainder in Stock C. Based on the following information,
what is the expected return of your portfolio?
State of EconomyProbability of State EconomyReturn if State OccursStock
AStock BStock CBoom.21-15.0%-2.0%-
20.9%Normal.4811.2%6.6%15.2%Recession.3124.8%13.9%29.8% - correct
answer ✔9.95%


Which one of the following stocks is correctly priced if the risk-free rate of
return is 3.2 percent and the market risk premium is 7.7 percent?

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller Academia199. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $13.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

66184 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 15 years now

Start selling
$13.49
  • (0)
Add to cart
Added