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

Econ , What effect would a rule stating that university students must live ...

What effect would a rule stating that university students must live in university dormitories have on the price elasticity of demand for dormitory space? What impact might this in

Internal audit, Explain the essential distinction among the stages of growt...

Explain the essential distinction among the stages of growth theory of development, the theory of international-dependence in both its neo-marxist and false paradigm conceptualizat

Particular large hotel has 790 rooms, Suppose that a particular large hotel...

Suppose that a particular large hotel has 790 rooms. Furthermore, suppose that the hotel's marketing group's forecast is normally distributed with a mean demand of 730 rooms and a

Foreign exchange market, Consider the following information in the internat...

Consider the following information in the international money markets:             Spot rate                       :           $0.95:€             Forward rate (one year)  :

Is the balance of payments a problem, Is the balance of payments a problem?...

Is the balance of payments a problem? A persistent balance of payments shortage is bad when used to finance consumption, but good when financing imports of suitable capital wh

What is poverty, What is poverty? Poverty is a complicated multidimens...

What is poverty? Poverty is a complicated multidimensional model measured by using a range of indicators. It is about disparities into the distribution of power, opportunity a

Base multiplier framework for money supply, Question: Extract of the Sp...

Question: Extract of the Speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Swiss Banking Global Symposium, Zurich, 16 November 2012

What is pps?, Packets per second (pps) are a measure of throughput for netw...

Packets per second (pps) are a measure of throughput for network devices like bridges, routers, and switches. It is a reliable measurement only if all packet sizes are the similar.

Asking process functionality to system under development, As selling is an ...

As selling is an ‘asking process’, how you could use this to assist you sell some further functionality to a system under development? When we use the buying cycle like a guide

How can trade agreements assist development, How can trade agreements assis...

How can trade agreements assist development? A trade agreement is while two or more countries to by decrease or abolish tariffs, non-trade and quotas barriers which are establ

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