The writer is very fast, professional and responded to the review request fast also. Thank you.
Presentation/PPT
27/08/2022
EXPECTED RETURN AND MARKET RISK PROBLEM SOLUTION
(***** 100% Correct With Calculation *****)
Unit 4Assignment 2
Instructions
Answer the following questions and complete the following problems, as applicable:
You may solve the following problems algebraically, or you may use a financial calculator or Excel spreadsheet. If you choose to solve the problems algebraically, be sure to show your computations. If you use a financial calculator, show your input values. If you use an Excel spreadsheet, show your input values and formulas.
Note: In addition to your solution to each computational problem, you must show the supporting work leading to your solution to receive credit for your answer.
1. “Why is expected return considered forward-looking? What are the challenges for practitioners to utilize expected return” (Cornett, Adair, & Nofsinger, 2014, p. 250)?
2. “Describe how different allocations between the risk-free security and the market portfolio can achieve any level of market risk desired” (Cornett, Adair, & Nofsinger, 2014).
3. Refer to the table below to complete this question. “Compute the expected return given these three economic states, their likelihoods, and the potential returns” (Cornett, Adair, & Nofsinger, 2014).
4. “If the risk-free rate is 6 percent and the risk premium is 5 percent, what is the required return” (Cornett, Adair, & Nofsinger, 2014, p. 251)?
5. “The average annual return on the Standard and Poor’s 500 Index from 1986 to 1995 was 15.8 percent. The average annual T-bill yield during the same period was 5.6 percent. What was the market risk premium during these 10 years” (Cornett, Adair, & Nofsinger, 2014, p. 251)?
6. “Hastings Entertainment has a beta of 0.24. If the market return is expected to be 11 percent and the risk-free rate is 4 percent, what is Hastings’ required return” (Cornett, Adair, & Nofsinger, 2014, p. 251)?
7. Use the capital asset pricing model to calculate Hastings’ required return.
8. Calculate the beta of your portfolio, which comprises the following items: (a) Olympic Steel stock, which has a beta of 2.9 and comprises 25 percent of your portfolio, (b) Rent-a-Center stock, which has a beta of 1.5 and comprises 35 percent of your portfolio, and (c) Lincoln Electric stock, which has a beta of 0.2 and comprises 40 percent of your portfolio (Cornett, Adair, & Nofsinger, 2014).
|
|
||
|
Economic State |
Probability |
Return |
|
Fast Growth |
0.30 |
40% |
|
Slow Growth |
0.50 |
10% |
|
Recession |
0.20 |
−25% |
Submit your completed assignment as an attachment in the assignment area. You may use either a Word document or an Excel spreadsheet for your work, but not both. Prior to submitting your assignment, review the Estimating Risk and Return Scoring Guide to ensure you have met all of the requirements and as a self-assessment of your work.
Reference
Cornett, M. M., Adair, T. A., & Nofsinger J. (2014). M: Finance (2nd ed.). New York, NY: McGraw-Hill.
U Can Also Purchase Unit 4 Assignment 1 (***** Just Click On Below Link *****)
The writer is very fast, professional and responded to the review request fast also. Thank you.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more