Stocks rate of return, Business Economics

Assignment Help:

Question 1:

(a) There are few, if any, real companies with negative betas. But suppose you found one with β= -0.25. How would you expect this stock's rate of return to change if the overall market rose by an extra 5 percent? What if the market fell by an extra 5 percent?

(b) You have Rs1 million invested in a well-diversified portfolio of stocks. Now you receive an additional Rs. 20,000 bequest.

Which of the following actions will yield the safest overall portfolio return?

(i) Invest Rs. 20,000 in Treasury bills (which have β = 0).
(ii) Invest Rs. 20,000 in stocks with β = 1.
(iii) Invest Rs. 20,000 in the stock with β = -0.25.

(c) Diversification has enormous value to investors, yet opportunities for diversification should not sway capital investment decisions by corporations. How would you explain this apparent paradox?


Related Discussions:- Stocks rate of return

Calculate the equilibrium price and output for each firm, Problem 1: (i...

Problem 1: (i) Assuming a Cournot duopoly where the market demand is estimated as: P = 100 - Q The marginal cost is estimated to be constant at Rs. 10 for the two fir

Price elasticity of demand, Aska) Explain why each of the following factors...

Aska) Explain why each of the following factors may influence the own price elasticity of demand for a commodity. (i) Consumer preferences, that is, whether consumers regard the c

Quantity of salt demanded, why does the quantity of salt demanded tend to b...

why does the quantity of salt demanded tend to be unresponsive to changes in its price?

Method for choosing decision tree tools, Banking on a Beard Award Deci...

Banking on a Beard Award Decision trees are models which allow you to both visualize and quantify a range of possible outcomes when faced with complex choices. These models in

How is gross domestic product capturing economic dimension, How is Gross Do...

How is Gross Domestic Product capturing the economic dimension of human well-being? GDP (Gross Domestic Product) only captures the economic dimension of human well-being. All c

What is an interest sensitive good?, Things like housing and autos tend to ...

Things like housing and autos tend to be affected by changes in interest rates due to financing is typically needed to make such purchases. If financing becomes more costly due to

Analyse the transmission mechanism, Question: (a) State whether the fol...

Question: (a) State whether the following statements are TRUE or FALSE. Justify briefly your answer. (i) Money is the most liquid medium to store value. (ii) An increa

Graphing Taxation., Demonstrate graphically the cost of income taxation of ...

Demonstrate graphically the cost of income taxation of 30% to consumers and producers for an income of $27,908. How does the taxation change if the income was $220,874? How does

General and specific training, QUESTION 1 (a) Suppose the government de...

QUESTION 1 (a) Suppose the government decides to implement a minimum wage to help low-income workers. How will the minimum wage affect the demand for labor and what does this i

Write Your Message!

Captcha
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