Determine a fair level of expected return

Reference no: EM131926542

Question: Your forecasting model projects an expected return of 17.25% for Stock A and an expected return of 33.75% for Stock B. Using the information in questions 1 and 2 and your forecasted expected returns, what is your best estimate of the alpha of your portfolio when using CAPM to determine a fair level of expected return?

1. The expected rate of return on the market portfolio is 11.50% and the risk-free rate of return is 2.00%. The standard deviation of the market portfolio is 19.75%. What is the representative investor's average degree of risk aversion?

2. Stock A has a beta of 1.50 and a standard deviation of return of 32%. Stock B has a beta of 3.50 and a standard deviation of return of 58%. Assume that you form a portfolio that is 45% invested in Stock A and 55% invested in Stock B. Using the information in question 1, according to CAPM, what is the expected rate of return on your portfolio?

Reference no: EM131926542

Questions Cloud

Describe human anatomy and physiology : Use relevant vocabulary, including anatomical positions, to describe human anatomy and physiology and the role of homeostasis and metabolism

How much money will you make into the arbitrage buying : You are looking at option prices on calls and puts and noticed that Biogen Idec (BIIB) is currently selling at $319.55. You look up the price of a call.

Develop an eer model for the given problem description : House2Home Franchise Application Database System. You are required to develop an EER model for the above problem description.

What is the inventory turnover ratio of this firm : What is the current ratio of this firm? What is the quick ratio of this firm? What is the inventory turnover ratio of this firm?

Determine a fair level of expected return : Your forecasting model projects an expected return of 17.25% for Stock A and an expected return of 33.75% for Stock B. Using the information in questions.

Relationship and the differences between lmna : Explain the relationship and the differences between LMNA, LMNC, and progerin.

What are the implications of the three theories : What are the implications of the three theories for financial managers regarding the optimal capital structure?

How is urine concentrated and diluted : How is urine concentrated and diluted? Incorporate the "single effect", corticopapillary interstitial osmotic gradient, medullary recycling of urea

Describe the mechanisms by which changes in plasma : Describe the mechanisms by which changes in plasma osmolality or changes in mean arterial pressure or blood volume affect the secretion of AVP.

User Account

All Pages