Evaluating risk and return

Assignment Help Financial Management

Reference no: EM131057672

Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 40% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.

A. Calculate each stock's coefficient of variation. Round your answers to two decimal places.

CV_x =

CV_y =

B. Calculate each stock's required rate of return. Round your answers to two decimal places.

r_x =

r_y =

C. Calculate the required return of a portfolio that has $10,000 invested in Stock X and $3,000 invested in Stock Y. Round your answer to two decimal places.

r_p =

Reference no: EM131057672

Questions Cloud

What is the npv of the packing machine : A project being considered is a semiautomated packing unti that would cost $390,000 including installation. This project would use the 7 year MACRS schedule with no residual value. What is the NPV of the packing machine?

How much will ultimate have to borrow : Ultimate Snowboards is in need of $400,000 to purchase a new buffing machine. Funds can be obtained from a bank at 8 percent discount interest for one year. How much will Ultimate have to borrow? What is the effective rate on this loan?

Dividends are expected to grow at a rate : Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 12 percent, and the company just paid a di..

Most recent dividend per share paid on the stock : Secolo Corporation stock currently sells for $81 per share. The market requires a return of 11.1 percent on the firm’s stock. If the company maintains a constant 3 percent growth rate in dividends, what was the most recent dividend per share paid on ..

Evaluating risk and return : Stock X has a 10.5% expected return, a beta coefficient of 1.0, and a 40% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 30.0% standard deviation. Calculate each stock's coefficient of va..

Preferred shareholders are granted : Preferred shareholders are granted:

Efficient diversification is build portfolio of securities : The key to efficient diversification is to build a portfolio of securities that are:

Risky asset over that required from risk-free asset : The risk premium is the excess return required from a risky asset over that required from a risk-free asset. The lower the average return, the greater the risk premium. Based on historical returns, there are rewards for bearing risk. In general, the ..

Comparisons between debt and equity : Which one of the following comparisons between debt and equity is correct?

User Account

All Pages