Regression describing the evolution of beta over time

Assignment Help Financial Management
Reference no: EM131878422

A stock recently has been estimated to have a beta of 1.14:

a. What will a beta book compute as the “adjusted beta” of this stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

ADJUSTED BETA   

b. Suppose that you estimate the following regression describing the evolution of beta over time:

βt = 0.5 + 0.5βt–1

What would be your predicted beta for next year? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

PREDICTED BETA

Reference no: EM131878422

Questions Cloud

What will the cash flows for this project be during year two : The firm's marginal tax rate is 40 percent. What will the cash flows for this project be during year 2?
Calculate the profitability index-NPV and IRR : Calculate the profitability index, NPV and IRR.
Correlation coefficient with the market portfolio doubles : What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)?
According to the capital asset pricing model : what is the required rate of return for Stock B according to the Capital Asset Pricing Model (CAPM)?
Regression describing the evolution of beta over time : Suppose that you estimate the following regression describing the evolution of beta over time:
Macrs schedule for determining depreciation expense : If you use the 7-year MACRS schedule for determining depreciation expense, how much will depreciation be for year 3?
Forward rate is unbiased predictor of future spot rate means : The fact that the forward rate is an unbiased predictor of future spot rate means that:
Terminal value that should be added to year six cash flows : what is the terminal value that should be added to Year 6 cash flows?
Economists are predicting that canadian inflation rate : Economists are predicting that Canadian inflation rate will be 4% next year. If the Canadian real rate of 2.5%, what is the nominal rate for the country.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the present value of your windfall

What is the present value of your windfall if the appropriate discount rate is 12 percent?

  What is the value of milton industries with? leverage

What is the value of Milton Industries without? leverage? What is the value of Milton Industries with? leverage?

  Should the firm make the investment

Tangshan Mining Company is considering investing in a new mining project. The firm’s cost of capital is 12 percent and the project is expected to have an initial cost of $5,000,000. Calculate the project’s NPV. Should the firm make the investment?

  How much will be in this man safety net fund

A man decides to save $1,500 at the beginning of every month for the next five years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 4.5% interest compounded monthly. The first deposit wi..

  Identify and explain three errors in quoted option price

The share price of a stock is 25 today. Calls and puts on the stock have the following quotations. Identify and explain three errors in the quoted option prices.

  Discuss two biggest challenges facing financial managers

Given the market structures as described in the video, identify at least two articles from the ProQuest database that highlight and discuss two of the biggest challenges facing financial managers today in these varied market structures

  What is the after tax salvage value of selling new machinery

What is the Operating Cash Flow in year two for this project? What is the after tax salvage value of selling the new machinery in three years?

  What is your holding period return on this investment

Four months ago, you purchased 100 shares of Lakeside Bank stock for $11.20 a share. You have received dividend payments equal to $1.89 a share. Today, you sold all of your shares for $7.72 a share. What is your holding period return on this investme..

  Calculate the profitability index for each press

Calculate the net present value (NPV) of each press. Calculate the profitability index (IP) for each press.

  Excess profits based on the analysis of historical price

Investors cannot earn excess profits based on the analysis of historical price information. We say that the financial markets are: Stock A has an expected return of 16 percent and a beta of 1.4. Stock B has an expected return of 11 percent and a beta..

  Determine the degree of operating leverage

Determine the degree of operating leverage for a firm that has the percentage change in sales equal to 35% and the percentage change in operating income is 46%.

  Loan losses will have a loan reserves at the end of year

A bank which starts with a loan loss reserves of 2.5 million at the beginning of the year charges off worthless loans of 1.02 million during the year, recovers.50 million on loans previously charged off and charges current income for 3.02 million pro..

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