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Reading 53: Portfolio Risk and Return: Part II-LOS e 习题精选

Session 12: Portfolio Management
Reading 53: Portfolio Risk and Return: Part II

LOS e: Calculate and interpret beta.

 

 

The expected rate of return is 1.5 times the 16% expected rate of return from the market. What is the beta if the risk free rate is 8%?

A)
3.
B)
2.
C)
4.


 

24 = 8 + β (16 ? 8)
24 = 8 + 8β
16 = 8β
16 / 8 = β
β = 2

The expected rate of return is twice the 12% expected rate of return from the market. What is the beta if the risk-free rate is 6%?

A)
2.
B)
3.
C)
4.


24 = 6 + β (12 ? 6)

18 = 6β

β = 3

TOP

Given the following data, what is the correlation coefficient between the two stocks and the Beta of stock A?

  • standard deviation of returns of Stock A is 10.04%
  • standard deviation of returns of Stock B is 2.05%
  • standard deviation of the market is 3.01%
  • covariance between the two stocks is 0.00109
  • covariance between the market and stock A is 0.002

Correlation Coefficient Beta (stock A)

A)
0.6556 2.20
B)
0.5296 0.06
C)
0.5296 2.20


correlation coefficient = 0.00109 / (0.0205)(0.1004) = 0.5296.

beta of stock A = covariance between stock and the market / variance of the market

Beta = 0.002 / 0.03012 = 2.2

TOP

Beta is a measure of:

A)
systematic risk.
B)
total risk.
C)
company-specific risk.


Beta is a measure of systematic risk.

TOP

Beta is least accurately described as:

A)
a standardized measure of the total risk of a security.
B)
a measure of the sensitivity of a security’s return to the market return.
C)
the covariance of a security’s returns with the market return, divided by the variance of market returns.


Beta is a standardized measure of the systematic risk of a security. β = Covr,mkt / σ2mkt. Beta is multiplied by the market risk premium in the CAPM: E(Ri) = RFR + β[E(Rmkt) – RFR].

TOP

An analyst has developed the following data for two companies, PNS Manufacturing (PNS) and InCharge Travel (InCharge). PNS has an expected return of 15% and a standard deviation of 18%. InCharge has an expected return of 11% and a standard deviation of 17%. PNS’s correlation with the market is 75%, while InCharge’s correlation with the market is 85%. If the market standard deviation is 22%, which of the following are the betas for PNS and InCharge?

Beta of PNS Beta of InCharge

A)
0.61 0.66
B)
0.66 0.61
C)
0.92 1.10


Betai = (si/sM) × rI, M
BetaPNS = (0.18/0.22) × 0.75 = 0.6136
BetaInCharge = (0.17/0.22) × 0.85 = 0.6568

TOP

If the standard deviation of the market’s returns is 5.8%, the standard deviation of a stock’s returns is 8.2%, and the covariance of the market’s returns with the stock’s returns is 0.003, what is the beta of the stock?

A)
0.05.
B)
1.07.
C)
0.89.


The formula for beta is: (Covstock,market)/(Varmarket), or (0.003)/(0.058)2 = 0.89.

TOP

Which of the following statements about a stock's beta is CORRECT? A beta greater than one is:

A)
riskier than the market, while a beta less than one is less risky than the market.
B)
risky, while a beta less than one is risk-free.
C)
undervalued, while a beta less than one is overvalued.


Beta is a measure of the volatility of a stock.  The overall market's beta is one. A stock with higher systematic risk than the market will have a beta greater than one, while a stock that has a lower systematic risk will have a beta less than one.

TOP

The expected rate of return is 2.5 times the 12% expected rate of return from the market. What is the beta if the risk-free rate is 6%?

A)
5.
B)
3.
C)
4.


30 = 6 + β (12 - 6)
24 = 6β
β = 4

TOP

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