Nikul Problem 13-10 (Algo) Risk-averse [LO13-2]Tim Trepid is highly risk-averse while Mike Macho actually enjoys taking a risk.InvestmentsBuy stocksBuy bondsBuy commodity futuresBuy optionsReturns:ExpectedValueStandardDeviation$ 9,470$ 6,1207,5602,85020,40026,10018,80016,600a-1. Compute the coefficients of variation.Note: Round your answers to 3 decimal places.Coefficient ofBuy stocksBuy bondsBuy commodity futuresBuy optionsVariation

Step 1:We have to calculate the coefficient of variation of the following investments.The formula…

Answered: Problem 13-10 (Algo) Risk-averse…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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13. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percent) REQUIRED RATE OF RETURN (Percent) 20.0 16.0 20 12.0 16 8.0 12 4.0 0 0 CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's betal Required rate of return on Happy Corp. stock 0 Happy Corp.'s new required rate of return is F 0.6, 7.6 HC's Stock ☐ 0.5 An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.'s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst's prediction. 0 1.0 RISK (Beta) Tool tip: Mouse over the…
Problem 13-27 SML (LO4) Suppose you observe the following situation: Security Pete Corp. Repete Co. Pete Corp. Repete Co. Beta 1.35 1.04 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Expected Return on Market Risk-free rate Expected Return 0.145 0.110 What is the risk-free rate? (Do not round intermediate calculations. Round the final answer to 3 decimal places.) %
Problem 13-10 (Algo) Risk-averse [LO13-2] Tim Trepid is highly risk-averse while Mike Macho actually enjoys taking a risk. Returns: Expected Value $ 8,800 7,000 16,900 11,600 Investments Buy stocks Buy bonds Buy commodity futures Buy options a-1. Compute the coefficients of variation. Note: Round your answers to 3 decimal places. Buy stocks Buy bonds Buy commodity futures Buy options Coefficient of Variation Standard Deviation $ 5,600 2,060 22,100 12,400
Problem 7-12 Suppose that there are many stocks In the security market and that the characteristics of stocks A and Bare glven as follows: Expected Standard Stock Return Deviation A 10 48 19 11 Correlation = -1 Suppose that It is possible to borrow at the risk-free rate, rĘ What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfollo from stocks A and B.) (Do not round Intermedlate calculations. Round your answer to 3 decimal places.) Risk-free rate
Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.25 .87 Expected Return 1080 .0820 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return on market using Pete Corporation a. Expected return on market using Repete Company b. Risk-free rate de de % % %
Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.70 1.39 a. Expected return on market b. Risk-free rate Expected Return .180 .153 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % %
es Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.75 1.44 Pete Corp. Repete Co. What is the risk-free rate? (Do not round intermediate calculations. Round the final answer to 3 decimal places.) Expected Return 0.185 0.158 Risk-free rate Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) % Expected Return on Market %
Problem 13-4 Information Ratio (LO1, CFA5) You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio X Y 2 Market Risk-free. Rp 12.50% 11.50 7.10 10.50 6.20 Information ratio ºp 34.00% 29.00 19.00 24.00 0 1.50 1.20 0.80 1.00 0 Assume that the tracking error of Portfolio X is 10.50 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.70 0.180 Repete Col 1.39 0.153 What is the risk-free rate? (Do not round intermediate calculations. Round the final answer to 3 decimal places) Risk-free rate % Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Expected Return on Market Pete Corp. Repete Co.%
Do not provide solution in imge format. and also do not provide plagarised content otherwise i dislike. Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows:ExpectedStandard DeviationReturn12%175%11-1CorrelationStockABSuppose that it is possible to borrow at the risk-free rate, rf. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from stocks A and B. Since they have a perfect negative correlation, the rate of return will be the r Note: Do not round intermediate calculations. Round your answer to 3 decimal places.Risk-free rate%
Exercise 5 (Part 2) (Consider the image of the table below) The expected return on treasury bills E(RF)= 4% - Calculate the correlation coefficient between the market portfolio andthe FGL security, and the correlation coefficient between the marketportfolio and the SDL security.- Calculate the beta of FGL stock relative to the market portfoliowith two different methods.- Calculate the beta of the SDL stock relative to the market portfoliowith two different methods.
11. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: CAPM Elements Value Risk-free rate (rRFrRF) ________? Market risk premium (RPMRPM) __________? Happy Corp. stock’s beta ___________? Required rate of return on Happy Corp. stock ___________? An analyst believes that inflation is going to increase by 3.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML.

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