EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 24, Problem 9PS
A
Summary Introduction
To calculate: The value of alpha, information ratio, Sharpe ratio, and Treynor measure for stocks with the given information.
Introduction: The value of alpha is depending upon the standard deviation, return value and excess return value. Information ratio is ratio of alpha and residual standard deviation.
B
Summary Introduction
To explain: The choice to be made of best stock in different given circumstances.
Introduction: Compare all the values of different parameters we find that stock ‘A’ has high Sharpe ratio and stock ‘B’ has high alpha value and treynor ratio.
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Students have asked these similar questions
When working with the CAPM, which of the following factors can be determined with the most precision?
a. The most appropriate risk-free rate, rRF.
b. The market risk premium (RPM).
c. The beta coefficient, bi, of a relatively safe stock.
d. The expected rate of return on the market, rM.
e. The beta coefficient of "the market," which is the same as the beta of an average stock.
When working with the CAPM, which of the following factors can be determined with the most precision?
a. The beta coefficient of "the market," which is the same as the beta of an average stock.
b. The beta coefficient, bi, of a relatively safe stock.
c. The market risk premium (RPM).
d. The most appropriate risk-free rate, rRF.
e. The expected rate of return on the market, rM.
From the following information, calculate covariance between stocks A and B and expected return and risk of a portfolio in which A and B are equally weighted.Which stock would be best recommend if investment in individual stock is to be made? Justify the answer using numerical calculations.
Stock A
Stock B
Expected return
24%
35%
Standard deviation
12%
18%
Coefficient of correlation
0.65
Chapter 24 Solutions
EBK INVESTMENTS
Ch. 24 - Prob. 1PSCh. 24 - Prob. 2PSCh. 24 - Prob. 3PSCh. 24 - Prob. 4PSCh. 24 - Prob. 5PSCh. 24 - Prob. 6PSCh. 24 - Prob. 7PSCh. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Prob. 10PS
Ch. 24 - Prob. 11PSCh. 24 - Prob. 12PSCh. 24 - Prob. 13PSCh. 24 - Prob. 14PSCh. 24 - Prob. 15PSCh. 24 - Prob. 16PSCh. 24 - Prob. 17PSCh. 24 - Prob. 18PSCh. 24 - Prob. 19PSCh. 24 - Prob. 20PSCh. 24 - Prob. 21PSCh. 24 - Prob. 22PSCh. 24 - Prob. 1CPCh. 24 - Prob. 2CPCh. 24 - Prob. 3CPCh. 24 - Prob. 4CPCh. 24 - Prob. 5CPCh. 24 - Prob. 6CPCh. 24 - Prob. 7CPCh. 24 - Prob. 8CPCh. 24 - Prob. 9CPCh. 24 - Prob. 10CPCh. 24 - Prob. 11CPCh. 24 - Prob. 12CPCh. 24 - Prob. 13CPCh. 24 - Prob. 14CP
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