E(R)=Rf+B*(Rm-Rf) Rm(market return)=(E(R)-Rf+B*Rf)/B=(.16-.09+1.1*.09)/1.1=.1536 The answer is 15.36%
(NN)
13.3
13.75= 5 +7(BETA)13.75-5=7BETA8.75/7 = BETA1.25 = BETA
Require Rate of Return is formulated as: Riskfree Rate + Beta(Risk Premium) Required Rate of Return = 4.25 + 1.4 (5.50) = 11.95%
E (return) = Rf + Beta[Rm - Rf] = 6 + (7) (13-6) = 55 %
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In the world of finance: BETA is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.
A positive beta means that the asset generally follows the market. A negative beta shows that the asset inversely follows the market; the asset generally decreases in value if the market goes up and vice versa.
The negative sign in beta represents the inverse relationship between the return on an asset and the return on the overall market. A negative beta suggests that the asset tends to move in the opposite direction of the market, indicating that it is likely to perform well when the market declines and vice versa. This negative correlation can be valuable for diversification purposes in a portfolio.
13.3
the beta is 1 the beta is 1
13.75= 5 +7(BETA)13.75-5=7BETA8.75/7 = BETA1.25 = BETA
.14=.05+1.5(market return-.05) .09=1.5market return-.075 .165/1.5=market return .11 or 11%=market return
The total risk of a single asset is measured by the standard deviation of return on asset. Standard deviation is the square root of variance. To measure variance, you must have some distribution/ possibility of asset returns. However, the relevant risk of a single asset is the systematic risk, not the total risk. Systematic risk is the risk that cannot be diversified away in a portfolio. Systematic risk of an asset is measured by the Beta. Beta can be found using Regression (between market return and asset's return) or Covariance formula.
Require Rate of Return is formulated as: Riskfree Rate + Beta(Risk Premium) Required Rate of Return = 4.25 + 1.4 (5.50) = 11.95%
E (return) = Rf + Beta[Rm - Rf] = 6 + (7) (13-6) = 55 %
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
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