Mf1. Consider the following(Rx - Rf) = 0.027639 +0.888881 (Rm - Rf) + exOM = 0.06157030; Rf = 0.021258, Rm = 0.096539, R²x = 0.536200What is the variance of stock X. (Round to 6 decimals).

R-squared value is the square of correlation value between stock and market. Beta is calculated…

Answered: Consider the following (Rx - Rf) =…

Consider the following (Rx - Rf) = 0.027639 +0.888881 (Rm - Rf)+ ex 0M= 0.06157030; Rf = 0.021258, Rm = 0.096539, R2x = 0.536200 What is the variance of stock X. (Round to 6 decimals).

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter5: Probability: An Introduction To Modeling Uncertainty

Section: Chapter Questions

Problem 28P

See similar textbooks

Related questions

Q: What happens if you sell short calls and they become deep in-the-money? A. You risk being…

A: Call options are types of option contract which will provide with right to buy an underlying…

Q: A five-year bond is issued with a face value of GHC3000.The bond pays coupon semiannually at 10%.…

A: Solution Price, Duration and convexity of 5 year 10% annually coupon paying bond with YTM is 8%…

Q: Suppose that Steady State Electronics wins a major contract for its new computer chip. The very…

A: The dividend discount model (DDM), a mathematical technique for predicting the price of a company's…

Q: Which of the following exposure does not have cash flow effect? Group of answer choices Transaction…

A: The transaction that results in either cash inflow or cash outflow is supposed to affect cash flow.…

Q: How should sensitivity analysis be conducted and how should excluded costs or benefits be handled?

A: Sensitivity Analysis: It’s a financial model that determines how target variables get changed due to…

Q: Which of the following security instruments, if any, does not allow the debtor the right of…

A: The progression of the foreclosure brought some respite to the mortgagees. Upon default, the…

Q: Olivia plans to make 25 annual contributions to a college saving account, with the first…

A: An ordinary annuity is a cash flow made at the end of each period for a fixed term. If cash flow is…

Q: 8. Mandy has just joined an 8-year investment plan that requires her to deposit $1,000 at the end of…

A: Tenure of the Investment plan = 8 year Monthly Deposit = 1000 No. of…

Q: Given the 2-year LIBOR rate r₂ = 4% and the forward rate f26 = 3%, calculate the spot rate $6. Give…

A: The forward rate is the yield of a future payment plan. It can be calculated from the spot rates of…

Q: If a stock consistently goes down (up) by 1.27% when the market portfolio goes down (up) by 1.07%,…

A: Solution:- Beta of stock means the sensitivity of return of stock with change in return of market.…

Q: Solve soon i will give u 2 like sure Investors are most likely to use what type of valuation across…

A: Valuation of securities The process involving identifying the value of a security is known as the…

Q: After learning the course, you divide your portfolio into three equal parts (i.e., equal market…

A: Solution:- Beta of portfolio means the sensitivity of return of portfolio with change in return of…

Q: You want to get a commercial real estate mortgage of $6875599. You are offered a monthly payment…

A: Monthly mortgage payment = Mortgage amount * monthly rate/[1-(1+monthly rate)^-monthly periods.

Q: ces Required information Section Break (8-11) [The following information applies to the questions…

A: The question is related to the Portfolio Management. The minimum variance Portfolio is the optimum…

Q: Use the Black - Scholes formula to find the value of a call option based on the following input.…

A: Time to expiration (T) = 0.5 year Standard deviation (σ) = 20% Exercise price (X) =…

Q: What are the capital gain rates for California? 50% of the federal ordinary tax rates. The same as…

A: The capital gain rates for California are same as the taxpayer's regular tax rate. California is…

Q: SkyHi Corp.'s beta is 1.2. The expected market return is 6.4%. The risk-free rate is 3.7%. Find…

A: Capital Asset Pricing Model(CAPM) is used to find out cost of equity or expected return of a risky…

Q: could you list the name of the recommended strategy as long call, write call, long put, or write…

A: Option strategies help to protect from any potential risk to be resulted from the movement of the…

Q: Company Q has 2 Million shares outstanding. Their recent share price was $30. Net Income was $4M.…

A: Earning per share is a financial metric measuring profitability It measures how much a share earns.…

Q: According to the dividend discount model, what is the value of a share of Bull DogPretzels stock…

A: The two stage dividend growth model and assumes that the extraordinary growth will continue for a…

Q: F2. Shares in LMN Corporation are selling for €40 each and there are 20,000 shares outstanding.…

A: The Shares in LMN corporation are selling for Euro 40 Each and There are 20,000 shares outstanding.…

Q: You are an employee of University Consultants, Limited, and have been given the following…

A: Debt coverage ratio: This ratio is a measure of a firm's ability to pay interest & principal…

Q: You are analyzing a valuation done on a stable firm by a well-known analyst. Based on the expected…

A: WACC refers to the return that the company provides to its stakeholders. It takes the size of the…

Q: A zero coupon bond maturing in 11 years has a par value of $1,000 and a yield to maturity of 9.87%.…

A: Bonds are fixed-income assets that serve as a representation of investor loans to borrowers…

Q: Consider the following information for the next year's return on IBM. probability return 10% 20% 0.8…

A: The profit or loss that an investor predicts on an investment with known historical rates of return…

Q: Ivan buys a fixed indexed annuity for $1,000 with the following features: In any year, if the return…

A: An option contract is an agreement that gives the buyer the right to acquire or transfer an…

Q: Jewels can expect a total of $17,125 + $29,000 = $46,125 in student loans when she graduates from…

A: Data given: Student loan= $46,125 Total interest=$3,690 Allowable deduction=$2500 Tax rate=22%…

Q: f a bond's yield to maturity does not change, the return on the bond each year will be equal to the…

A: YTM of the bond is the return per year a bond holder will receive if the bondholder holds the bond…

Q: Holding all other things constant, an American option should be worth _______ than a European…

A: Options are investment instruments that give the holder the freedom to exercise his/her right over…

Q: Delta Corporation has the following capital structure: Debt (K) Preferred stock (Kp) Common equity…

A: Capital Structure: It refers to how a firm finances its overall business operations and growth.…

Q: Thunderhorse Oil. Thunderhorse Oil is a U.S. oil company. Its current cost of debt is 7.10%, and the…

A: An entity has multiple options from where it can raise funds. Debt and equity are the major sources.…

Q: Consider an asset that costs $528,000 and is depreciated straight-line to zero over its 6-year tax…

A: Concept. aftertax cash flow from the sale of asset = sale value of asset + tax savings on loss due…

Q: 7. An all-equity firm has 100 million shares outstanding and $100 million in cash. The firm expects…

A: Share price refers to the amount that is paid by the investor for purchasing one share from the…

Q: A property is available for sale that could normally be financed with a fully amortizing $81,200…

A: Loan Amortization: Amortized loan refers to a certain loan type where the borrower makes scheduled…

Q: Assume UMASS Boston just received 10 million dollars from a major donor and the school's fund can…

A: Compound interest is a calculation where interest is added to the principal amount every year hence…

Q: Jellybean Manufacturing (hence, JM) has the opportunity to supply handheld computers to horse supply…

A: The cash flows indicate the information on the cash inflows and cash outflows. The company generates…

Q: Array intends to allocate her savings into various types of financial investments. She has $194,400…

A: Total Investment = 194400 Stock : Bond : Mutual fund ratio = (4/3) : (1/9) :…

Q: Select the images below to enlarge. Balance Sheet Murawski Company Balance Sheet December 31 Current…

A: Answer Formula is Inventory turnover ratio = cost of goods sold / average…

Q: Array intends to allocate her savings into various types of financial investments. She has $191,000…

A: We need to solve ratio first and allocate funds according to that ratio.

Q: A stock you purchased for $80 has paid out $2.50 in dividends. The stock is now selling for $100.…

A: To determine your capital gains yield, you need to calculate the difference between the price you…

Q: maturity

A: YTM or yield to maturity is the rate of return of the bond when it repays all its interest and…

Q: of output, that

A: Given Revenue =8075, And per unit price =8.50 So units sold in the week= 8075/8.50= 950 units sold…

Q: F4. You deposit $10,282 at the end of each year for the next 18 years. Your deposits earn 10…

A: The Future Value of Ordinary Annuity refers to the concept which determines the sum total of all the…

Q: A pizza restaurant is deciding among three options: Option 1: to open a second restaurant at a cost…

A: Data given: Option 1: to open a second restaurant Cost = $75,000. Chance of success= 80%, Earnings=…

Q: QUESTION 14 When cost of debt goes up, cap rates typically go down, high cost of borrowing means one…

A: in the capital structure. Suppose without considering the tax, take $ 100 is the value of total…

Q: Given the function f(x) each of the following. A) Evaluate f(-10) Note: Round your answers to two…

A: According to bartleby guidelines , if question involves multiple subparts , then 1st sub 3 parts…

Q: Q22-Q23 are based on the following information: You are trying to value a private company. The…

A: WACC The after-tax cost of capital from all available sources is known as WACC of a firm. The source…

Q: A firm has a long-term debt-equity ratio of 0.43. Shareholders' equity is $1.3 million. Current…

A: The debt-to-capital ratio is used to measure the company’s leverage. It allows the investors to make…

Q: A bond has a price of $98 (per $100 of face value), and yield to maturity of 7% and a duration of 18…

A: ∆P= -P*D/(1+i)*∆i Where P= 98, D = 18, i=0.06, ∆i= +0.008 = -97*18/(1+0.07)*0.008 = -13.188785

Q: Explain the qualitative factors that will need to be considered before making a decision about which…

A: Introduction:- In order to make a decision about which option a company should choose, a range of…

Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Mf1.

Consider the following
(Rx - Rf) = 0.027639 +0.888881 (Rm - Rf) + ex
OM = 0.06157030; Rf = 0.021258, Rm = 0.096539, R²x = 0.536200
What is the variance of stock X. (Round to 6 decimals).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Calculation

VIEW

Step by step

Solved in 2 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

If two stocks have variance σ^2=16 each, could their covariance be equal to σ12 = 20
You are given the following information about 4 stocks: Variance-Covariance Matrix 1 Stock 3 0.0125 0.0244 0.4525 0.0125 0.0759 0.0252 0.0155 0.0244 0.0252 0.0987 0.0832 0.4525 0.0155 0.0832 0.0288 4 1 0.0325 2 3 4 What is the variance of the equally weighted portfolio consisting of these stocks? Round your final answer to four decimal places.
1. Using the following returns, calculate the average returns, the variance, standard deviations, and coefficient of variation for X and Y. Which stock is the least risky? Yr 1 2 3 Rx 12.20 9.65 0.00 6.50 Ry 4 8.00 -2.00 12.50 9.57
If a stock's variance of return is written as σ2, then its standard deviation will be written as:
b. What is the variance of the stock's returns? The variance of the returns is 178.46917. (Round to five decimal places.)
Consider the probability distribution p(s) of the returns rA and rB of two securities A and B: state p(s) rA rB роог 0.2 0.1 0.16 medium 0.5 0.2 0.1 доod 0.3 0.3 0.05 Calculate the covariance oAB between rA and rB. The correct answer (up to four decimals is) Select one: GAB = 0.0013 GAB = -0.0027 GAB = -0.0102 None of the above
What is the variance of returns for Security ABC? no rounding off until the final answer; Format: final answer at 4 decimal places
A probability distribution of possible returns from a share has a variance of 0.0064. What is the standard deviation of this probability distribution? a. 0.08 b. 0.64 c. 8% d. Both (a) and (c)
Given the returns and probabilities for the three possible states listed below, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 8.10 percent and 11.60 percent, respectively. (Round answer to 4 decimal places, e.g. 0.0768.) Good OK Poor Covariance Probability 0.22 0.60 0.18 Return on Stock A 0.30 0.10 -0.25 Return on Stock B 0.50 0.10 -0.30
What is the Variance of returns for Security GLO? (no rounding off until the final answer, final answer at 4 decimal places)
3. Suppose the index model for stocks A and B is estimated with the following results:rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB , σM = 20%, and RM = rM − rf . The regressionR2 of stocks A and B is 0.40 and 0.30, respectively. Answer the following questions. (a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
a. The standard deviation of returns is 0.30 for Stock A and 0.20 for Stock B. The covariance betweenthe returns of A and B is 0.006. The correlation of returns between A and B is: