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- Beta of stocks of Company SSAL is 1.2, company ABL is 0.9 and Company DSTL is 1. Which amongst the three companies would have higher return on Investment a.Company SSAL b.Company ABL c.Company DSTL d. The return on all three companies would be sameUsing the equity asset valuation model (CAPM) equation, determine the required return for the shares of the following companies, if the market return is 7.50% (Rm = 7.50%) and the risk-free asset return is 1.25% (RF = 1.25%). You must show all counts. Stock Beta SKT 0.65 COST 0.90 SU 1.42 AMZN 1.57 V 0.94Below is a table of probabilities and expected returns for 2 securities under 3 possible scenarios: Possible Outcomes Probability Rate of Return Company G Company H Bullish Trend 0.3 50% 25% Normal Trend 0.4 20% 15% Bearish Trend 0.3 (10)% 15% Required: On the basis of Expected Rate of Return, Standard Deviation, Variance and Coefficient of variation decide which of the above companies is best for investment (Single company Risk analysis)
- Considering the following stock return information for Goya Foods and Bloomingdales, State of Economy Return onGoya Foods Return onBloomingdales Bear .108 −.051 Normal .109 .154 Bull .079 .239 If each state of the economy is equally likely to occur, the covariance between the two stocks is: a. -0.014820 b. 0.705700 c. -0.013900 d. 0.000190 e. -0.001195 NOTE: Indicate a negative answer with a minus sign.The returns on share A follow the market model with coefficients CA = 0.01, BA = 1.25. If at time t, K MT = 0.02 and the actual return on share A is 0.025, calculate EAt (the error term). 2. %3D %3DRisk-Return Tradeoff state that the more risk is willing to accept, the less return that should be expected Select one: at of O True O False mestion Next page us page CHAPTER S STOCK VALUATION- APTER 3-RATIO ANALYSIS (1) Jump to.. ENG 0711 INT 11/07/2021
- The possible returns from investing in BestMax share are as follows: State of economy Probability of state of economy Return if state occurs Strong 0.26 96% Normal 0.51 12% Weak 0.23 -83% Based on the above information, a. What is 'risk' in the context of financial decision-making? Explain.State ofEconomy Probabilityof State Return on AssetDin State Return on AssetEin State Return on AssetFin State Boom 0.35 0.060 0.310 0.25 Normal 0.50 0.060 0.180 0.20 Recession 0.15 0.060 -0.210 0.10 1.As an investor, compare Stock E with Stock F, and identify which stock willyou select and why.A share price is modelled via a two-period binomial model with initial stock price S=40, up/down multiplication factors u = per time period r = 4%. and d = and interest rate Explain Does this model satisfy the no-arbitrage assumption? Write 0 if your answer is 'no' and 1 if your answer is 'yes'. Answer: your argument in your hand-written answer (b) Calculate the risk-neutral probabilities of up and down movements in the share price. State your answer to three valid digits. Answer: P = Pd= (c) to three valid digits. Answer: Determine the no-arbitrage price of a European call option on the share with strike price K = 70 and expiry time T = 2. State your answer Explain your calculation steps in your hand-written answer.
- use attachment to answer question This question relates to Diagram 3 from the 9.4 diagrams, which shows the Security Market Line. A share has a beta of 0.75 and, based on the CAPM and the current price of the share, you believe it to be underpriced. Is this Share 1, 2, 3, or 4. Select one: a. 1 b. 2 c. 3 d. 4Below is a table of probabilities and expected returns for 2 securities under 3 possible scenarios: Posible outcomes Prababilty Rate of return Company G Rate of return Company H Bullish Trend 0.3 50% 25% Normal Trend 0.4 20% 15% Bearish Trend 0.3 10% 15% Required: On the basis of Expected Rate of Return, Standard Deviation, Variance and Coefficient of variation decide which of the above companies is best for investment (Single company Risk analysis).Suppose you have the follow information about Intrinsic Co. and the market. What is the Beta of Intrinsic Co.? Probability 0.48 0.35 0.17 a) 1.39 Ob) 1.13 c) 1.00 d) 1.26 Intrinsic Co. Returns 15.4% 17.9% 21.5% Market Returns 9.1% 10.8% 13.5%