Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Stock X: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 % -13 2 22 Stock Y 15% 7 -4 3 Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. 12 Market 13% 12 -10 2 15

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Assume that the risk-free rate is 5% and the market risk premium is 4%.
a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places.
%
Year
2017
2018
2019
2020
2021
%
Stock X
12%
17
-13
2
22
%
Stock Y
15%
7
-4
3
12
Stock X:
Stock Y:
b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places.
Stock X:
Stock Y:
c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places.
Market
13%
12
-10
2
15
Transcribed Image Text:Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 -13 2 22 % Stock Y 15% 7 -4 3 12 Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. Market 13% 12 -10 2 15
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