(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.3 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.05 −4 % 0.50 1 % 0.40 7 % 0.05 8 % (Click on the icon in order to copy its contents into a spreadsheet.)

(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.3 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.05 −4 % 0.50 1 % 0.40 7 % 0.05 8 % (Click on the icon in order to copy its contents into a spreadsheet.)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 23SP

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(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.10 −6 % 0.35 4 % 0.45 5 % 0.10 10 % (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The investment's expected return is enter your response here%. (Round to two decimal places.)
(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 3.9 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.20 −5 % 0.50 4 % 0.10 5 % 0.20 8 % (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The investment's expected return is enter your response here%. (Round to two decimal places.) b. the investment's standard devation is? round 2 decimal places c. should gautney invest in this security?
(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.7 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability 0.05 D 0.40 Return - 5% 3% 7% 10% (Click on the icon in order to copy its contents into a spreadsheet.) 0.50 0.05 a. The investment's expected return is%. (Round to two decimal places.)
(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 3.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability 0.10 0.40 0.40 0.10 (Click on the icon Return - 6% 1% 6% 8% in order to copy its contents into a spreadsheet.) a. The investment's expected return is %. (Round to two decimal places.)
(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Return -6% 3% 7% 9% Probability 0.05 0.35 0.55 0.05 (Click on the icon in order to copy its contents into a spreadsheet.) a. The investment's expected return is ... %. (Round to two decimal places.)
(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.6 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Return -4% 1% 6% 0.05 8% (Click on the icon in order to copy its contents into a spreadsheet.) Probability 0.05 0.35 0.55 a. The investment's expected return is 3.85%. (Round to two decimal places.) b. The investment's standard deviation is%. (Round to two decimal places.) C
(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security One-year Treasury bills are currently paying 3.1 percent. Calculate the investment's expected return and its standard deviation Should Gautney invest in this security? Probability 0.10 0.50 Return -6% 1% 5% 9% 0.30 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) CID a. The investment's expected return is%. (Round to two decimal places)
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Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.0 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.20 −7 % 0.30 1 % 0.30 3 % 0.20 7 %
PLEASE ANSWER ALL THE QUESTIONS Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nine line items. Question 2 Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph Question 3 From the information generated in the previous two questions; a) Identify two investment alternatives that can be combined in a portfolio. Assume a 50-50 investment allocation in each investment alternative. b) Compute the expected return of the portfolio thus formed. c) Compute the portfolio’s beta. Is the portfolio aggressive or defensive?
(Capital asset pricing model) Grace Corporation is considering the following investments. The current rate on Treasury bills is 2.5 percent and the expected return for the market is 9 percent. Stock Beta K 1.06 G 1.28 B 0.78 U 0.93 (Click on the icon in order to copy its contents into a spreadsheet.) a. Using the CAPM, what rates of return should Grace require for each individual security? b. How would your evaluation of the expected rates of return for Grace change if the risk-free rate were to rise to 4 percent and the market risk premium were to be only 6 percent? c. Which market risk premium scenario (from part a or b) best fits a recessionary environment? A period of economic expansion? Explain your response. Question content area bottom Part 1 a. The expected rate of return for security K, which has a beta of 1.06, is enter your response here%. (Round to two decimal places.) Part 2 The expected rate…
(Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is 6 percent, and the expected return for the market is 14 percent. Using the CAPM, what rates of return should Anita require for each individual security? Stock H T P W (Click on the icon in order to copy its contents into a spreadsheet.) Beta 0.92 1.63 0.87 1.17 a. The expected rate of return for security H, which has a beta of 0.92, is%. (Round to two decimal places.)