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You've observed the following returns on INTC Corporation's stock over the past five years: -25%, -16%, -9%, 11%, and 18%. Answer Questions 1 - 6.
- You've observed the following returns on INTC Corporation's stock over the past five years: -25%, -16%, -9%, 11%, and 18%. Answer Questions 1 - 6.
- What is the arithmetic average return on the stock over this five-year period?
- What is the variance of returns over this period?
- What is the standard deviation of returns over this period?
- Suppose the current T-bill rate is 0.15%. What is the risk premium of owing INTC Corporation's stock?
- What range of returns would you expect to see 95% of the time?
- a.-40.52% to 32.12%
- b.-12.49% to 31.69%
- c.9.6% to 22.09%
- d.-34.57% to 53.77%
- What is the geometric average return on the stock over this five-year period?
- Suppose you have $20,000 total. If you put $14,000 in Stock A and the remainder in Stock B, what will be the expected return on your portfolio?
- State of Economy
- Return on A
- Return on B
- Following Question 7, what will be the standard deviation on your portfolio?
- Stock Y has a beta of 1.50 and an expected return of 16%. Stock Z has a beta of 0.70 and an expected return of 11.5%. The market risk premium is 8%. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
- A stock has a beta of 0.8, the expected return on the market is 11%, and the risk-free rate is 0.5%. What must the expected return on this stock be?
- You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 16% and Stock Y with an expected return of 11%. If your goal is to ensure a portfolio with an expected return of 14.25%, how much money will you invest in stock X? In Stock Y?
- a.X: $6,500; Y: $3,500
- b.X: $4,500; Y: $5,500
- c.X: $3,500; Y: $6,500
- d.X: $5,500; Y: $4,500