Reference no: EM132744080

Questions -

Q1. A financial asset has an expected return of 8% with the risk free rate of 2%, however the standard deviation of the expected return is 10%, what is the Sharpe Ratio.

Pamsy is a freelancing investment banker for the last three years. She wants to calculate the expected rate of return for one of her investment, she gave her friend the following information to calculate the CAPM: risk free rate 5%, the expected return of the market is 10% and the systematic risk of the security is 1.3.

Q2. An investor is contemplating whether to invest in a stock which currently worth $100 per share today and pays a 3% annual dividend. The stock has a beta as compared to the market of 1.3, which is an indication that it is riskier than the market portfolio. Assume that the risk-free rate is 3.5% and the investor expects the market to rise in value by 8% per year. Calculate the CAPM?

Q3. Assume that an investor's portfolio has a return of 9% per year for the last 3 years with a standard deviation of returns of 8%. The market however averages a return of 7% for the last three years of 6%. Calculate the CAPM.

Q4. A stock currently trades on the Eastern Caribbean Stock exchange and its operations are based in St. Kitts and Nevis assume that the current yield on a 10- year treasury is 3.5%. The average excess historical annual return for stocks is 6.5%, the beta is 1.25, what is the CAPM?

Q5. Consider the multifactor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolio are 4% and 6% respectively. Stock W has a beta of 1.2 on factor 1 and beta of 0.7 on factor 2. The expected rate of return on stock S is 16% what is the risk-free rate of return?

Q6. A multifactor APT with two factors. Stock VWY has an expected return of 16.6%, a beta of 1.45 on factor 1 and a beta of .86 on factor 2. The risk premium on factor 1 portfolio is 3.2% the risk-free rate of return is 5%. What is the risk premium of factor 2 if no arbitrage opportunities exist?

Q7. The gross domestic product growth beta=0.5,RP=3% inflation rate: beta=0.8, RP=2% Silver prices: beta=-0.7, RP=5% Standard and Poor's 500 index return: Beta=1.3, RP=9% the risk free rate is 3% calculate the APT?

Q8. The gross domestic product growth beta=0.6,RP=4% inflation rate: beta=0.6, RP=3% Gold prices: beta= -0.7, RP=5% Standard and Poor's 500 index return: Beta=1.5, RP=7% the risk free rate is 4% calculate the APT?