Calculation of beta. Introduction: Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks. Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

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Answer 1

Question

Chapter 8, Problem 8.25P

a)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

b)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

c)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

d)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

e)

Summary Introduction

To discuss:

Maximum expected return for risk averse.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

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Students have asked these similar questions

Beta coefficients and the capital asset pricing model Personal Finance Problem Katherine Wilson is wondering how much risk she must undertake to generate an acceptable return on her porfolio. The risk-free return currently is 2%. The return on the overall stock market is 12%. Use the CAPM to calculate how high the beta coefficient of Katherine's portfolio would have to be to achieve a portfolio return of 13%.

Asset A B C Cost $35,000 $36,000 $39,000 $10,000 Beta at purchase 0.79 0.96 1.49 1.32 Yearly income $1,600 $1,500 SO $250 Value today $35,000 $37,000 $45,500 $10,500

Current Attempt in Progress You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock A B C Investment $190,000 285,000 475,000 Beta of the portfolio Beta Expected rate of return 1.45 0.60 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 17 percent and that the risk-free rate is 6 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) 1.30 %

Answer 2

Question

Chapter 8, Problem 8.25P

a)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

b)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

c)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

d)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

e)

Summary Introduction

To discuss:

Maximum expected return for risk averse.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Expert Solution & Answer

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Answer 3

Question

Chapter 8, Problem 8.25P

a)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

b)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

c)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

d)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

e)

Summary Introduction

To discuss:

Maximum expected return for risk averse.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 8, Problem 8.25P

a)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

b)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

c)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

d)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

e)

Summary Introduction

To discuss:

Maximum expected return for risk averse.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 8, Problem 8.25P

a)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

b)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

c)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

d)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

e)

Summary Introduction

To discuss:

Maximum expected return for risk averse.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 6

Chapter 8, Problem 8.25P

a)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 7

Chapter 8, Problem 8.25P

a)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 8

b)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 9

b)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 10

c)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 11

c)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 12

d)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 13

d)

Summary Introduction

To discuss:

Calculation of beta.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 14

e)

Summary Introduction

To discuss:

Maximum expected return for risk averse.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 15

e)

Summary Introduction

To discuss:

Maximum expected return for risk averse.

Introduction:

Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.

Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 8.1 - What is risk in the context of financial decision...Ch. 8.1 - Prob. 8.2RQ Ch. 8.1 - Compare the following risk preferences: (a) risk...Ch. 8.2 - Explain how the range is used in scenario...Ch. 8.2 - Prob. 8.5RQ Ch. 8.2 - Prob. 8.6RQ Ch. 8.2 - What does the coefficient of variation reveal...Ch. 8.3 - What is an efficient portfolio? How can the return...Ch. 8.3 - Prob. 8.9RQ Ch. 8.3 - How does international diversification enhance...

Solution Summary: The author explains how capital asset pricing model establishes the relationship between the projected return for assets and systematic risk on the stocks.

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