Which stock has the most systematic risk

Assignment Help Finance Basics
Reference no: EM131126406

Consider the following information on Stocks I and II:

2176_o.jpg

The market risk premium is 8 percent, and the risk-free rate is 5 percent. Which stock has the most systematic risk?

Which one has the most unsystematic risk? Which stock is "riskier"?Explain.

Reference no: EM131126406

Questions Cloud

Calculate the required return for each stock is each stock : Wilson's own forecasts of the returns on the two stocks are 13.25 percent for Furhman Labs and 11.25 percent for Garten. Calculate the required return for each stock. Is each stock undervalued, fairly valued, or overvalued?
Decompose the stock return into the systematic return : The beta for a certain stock is 1.15, the risk-free rate is 5 percent, and the expected return on the market is 13 percent. Complete the following table to decompose the stock's return into the systematic return and the unsystematicreturn.
Which stock has the most systematic risk : The market risk premium is 8 percent, and the risk-free rate is 5 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is "riskier"?Explain.
How much money will you invest in stock y : If X has an expected return of 31 percent and a beta of 1.8, Y has an expected return of 20 percent and a beta of 1.3, and the risk-free rate is 7 percent, how much money will you invest in Stock Y? How do you interpret your answer?
Use this information to calculate the security beta : Fill in the following table, supplying all the missing information. Use this information to calculate the security'sbeta.
Calculate beta is to take the covariance : Show that another way to calculate beta is to take the covariance between the security and the market and divide by the variance of the market’s return.
What is the expected return on the market : Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-freerate?

Reviews

Write a Review

Finance Basics Questions & Answers

  Future value-annuity versus annuity due

Find out the future value of 7 percent, 5-year ordinary annuity which pays $300 each year?

  Whole sale cost of a roll

Number of rolls of Supertrex sold = 20 x Dollars spent on advertising + 6.8 x Dollars spent on in-store displays + 12 x Dollars invested in on-hand wallpaper inventory - $65.000 x marke-up taken above whole sale cost of a roll.

  It is anticipated that the after-tax cash inflows from the

acquisition of assets for cash. master corporation wants to buy certain fixed assets of smith corporation. however

  What is the internal rate of return on this project

Quick Sale Real Estate Company is planning to invest in a new development. The cost of the project will be $23 million and is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years.

  Caluing business opportunities

Suppose that the role of finance section at Strident Marks. The finance section has a couple of new hires, and the CFO has asked that you spend a short amount of time with them,

  Determine cash flow statement

If a parent company has two wholly owned subsidiaries, how many legal and economic entities are there from the viewpoint of the shareholders of the parent company?

  Compute sustainable rate of growth

Compute sustainable rate of growth and the total asset turnover is 1.40 and the equity multiplier is 1.50

  Abc corporation is considering an expansion project

ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $29,388 and shipping and installation costs are another $717. The project will also require an initial $4,436 investment in net working capital. The c..

  Trigen corp management will invest cash flows of 268957

trigen corp. management will invest cash flows of 268957 926930 615498 818400 1239644 and 1617848 in research and

  What equal annual ammount must garrett save at the end

What equal annual ammount must Garrett save at the end of each year (the first deposit will occur on his 31st and the last deposit will occur on his 60th birthday) to meet these retirement goals?

  Find the annualized two period forward rate beginning

Suppose you are given the following risk-free spot rates for zero bonds maturing in 1,2, 3, 4 years, respectively : R1 = 0:05, R2 = 0:055, R3 = 0:0574, R4 = 0:06. Find the annualized two period forward rate beginning at period 2.

  Calculate the companys weighted-average cost of capital

Calculate the companys weighted-average cost of capital

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