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Historical returns-expected and required rates of return

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Historical Returns: Expected and Required Rates of Return

You have observed the following returns over time:

Year 2012 2013 2014 2015 2016

Stock X 15% 17 -18 3 18

Stock Y 11% 7 -6 1 8

Market 11% 11 -13 2 17

Assume that the risk-free rate is 3% and the market risk premium is 6%. Do not round intermediate calculations.

  • What is the beta of Stock X? Round your answer to two decimal places.
  • What is the beta of Stock Y? Round your answer to two decimal places.
  • What is the required rate of return on Stock X? Round your answer to one decimal place.
  • What is the required rate of return on Stock Y? Round your answer to one decimal place.
  • What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to one decimal place.

Reference no: EM132460686

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