Calculate the variability of the stock returns

Assignment Help Financial Management
Reference no: EM131980640

a. Calculate the variability (standard deviation) of the stock returns of California REIT and Brown Group during the past 2 years. How variable are they compared with Vanguard Index 500 Trust? Which stock appears to be riskless? b. Suppose Beta's position had been 99% of equity funds invested in the index fund and 1% in the individual stock. Calculate the variability of this portfolio using each stock. How does each stock affect the variability of the equity investment, and which stock is riskless? Explain how this makes sense in view of your answer to Question #1 above. c. Compute the "beta" for each stock using the Index returns as the Market returns. How does this relate to the situation described in Question #2 above? d. How might the expected return for each stock relate to its riskiness? e. How much will Sarah require / expect to earn on each stock given its riskiness in order to hold it? (What does each investment do to her overall risk?)

Reference no: EM131980640

Questions Cloud

We attempt to foretell the direction of the economy : Explain the reasons that we attempt to foretell the direction of the economy.
Use approach to find amount of life insurance : Darrell and Lena Jennings are two-income couple in their early 30s. Use approach to find amount of life insurance each should have if they want to replace 75 %
What is the APR of the loan : You have arranged for a loan on your new car that will require the first payment today. what is the APR of the loan
Present value of tax benefits from depreciation : Estimate the present value of the tax benefits from depreciation. Given a 5% interest rate what is the value of your retirement plan after 40 years?
Calculate the variability of the stock returns : Calculate the variability (standard deviation) of the stock returns of California REIT and Brown Group during the past 2 years.
Estimate present value of tax benefits from deprectiaon : Which of the following agencies do not supervise and examine some commercial banks in the U.S.? Estimate the present value of tax benefits from deprectiaon?
Payback period and accounting rate of return : Minn is considering an investment proposal with the following cash flows: Determine the payback period.
What is harpers expected return : J harpers Inc stock has a 50% chance or producing a 30% return. what is Harpers expected return?
Which machine should united automation sell : As a result of improvements in product engineering, Which machine should United Automation sell?

Reviews

Write a Review

Financial Management Questions & Answers

  Does the financial manager have a greater responsibility

Does the financial manager have a greater responsibility or a lesser responsibility for maintaining ethical corporate governance? Why or why not? What is or will be your approach to ethical corporate governance now or in the future?

  Find the excess of total cash for the month of june

a venture has 550,000 cash available for the month of June. it needs for disbursements and minimum cash balance of 700,000 for the month of June. Find the excess of total cash for the month of June

  Determine the expected return and coefficient of variation

Determine the Expected return, Standard deviation of returns and Coefficient of variation.

  Recapitalization-earnings and equal dividends per shares

Michaely Inc. is an all-equity firm with 100,000 shares outstanding. It has $500,000 of EBIT, which is expected to remain constant in the future. The company pays out all of its earnings, so earnings per share (EPS) equal dividends per shares (DPS).

  Nventory conversion period

Data on Shin Inc. for 2008 are shown below, along with the inventory conversion period (ICP) of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its inventory enough to reduce its ICP to the benchmarks’..

  Sources of cash are added-uses of cash are subtracted

The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the f..

  What is the future value of annuity payment

What is the future value of a $540 annuity payment over five years if interest rates are 9 percent?

  Evaluating the merits of leasing versus purchasing truck

Delmont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. What is the net advantage to leasing?

  What should you be willing to pay today for the annuity

An insurance company offers you an annuity of $36,000 per year for the next 15 years. They claim your return on the annuity is 13%. What should you be willing to pay today for the annuity?

  What is the real rate of return on investment

You recently purchased an investment that yields 8% per year. What is the real rate of return on this investment?

  Measured by the standard deviation of returns

Assume that your uncle holds just one stock, East Coast Bank (ECB), which he thinks has very little risk. You agree that the stock is relatively safe, but you want to demonstrate that his risk would be even lower if he were more diversified. Measured..

  The corresponding capitalization rate

the corresponding capitalization (cap) rate selected to determine its present value?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd