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28 Sep 2019
You have observed the following returns over time:? Year Stock X Stock Y Market 2006 14% 13% 12% 2007 19 7 10 2008 -16 -5 -12 2009 3 1 1 2010 20 11 15 Assume that the risk free rate is 6% and the market risk premium is 5% -what are the betas of stocks X and Y -What are the required rates of return on stocks X and Y -What is the required rate of return on a portfolio consisting of 80% of stock X and 20% of stock Y -If stock X's expected return is 22%, is stock X under or overvalued?
You have observed the following returns over time:? Year Stock X Stock Y Market 2006 14% 13% 12% 2007 19 7 10 2008 -16 -5 -12 2009 3 1 1 2010 20 11 15 Assume that the risk free rate is 6% and the market risk premium is 5% -what are the betas of stocks X and Y -What are the required rates of return on stocks X and Y -What is the required rate of return on a portfolio consisting of 80% of stock X and 20% of stock Y -If stock X's expected return is 22%, is stock X under or overvalued?
Reid WolffLv2
28 Sep 2019
Related questions
Problem 6-14
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
| Year | Stock X | Stock Y | Market |
| 2009 | 15% | 13% | 13% |
| 2010 | 17 | 7 | 8 |
| 2011 | -13 | -6 | -10 |
| 2012 | 2 | 3 | 3 |
| 2013 | 20 | 10 | 18 |
Assume that the risk-free rate is 3% and the market risk premium is 6%. Do not round intermediate calculations.
- What is the beta of Stock X? Round your answer to two decimal places.
What is the beta of Stock Y? Round your answer to two decimal places.
- What is the required rate of return on Stock X? Round your answer to one decimal place.
%
What is the required rate of return on Stock Y? Round your answer to one decimal place.
%
- What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to one decimal place.
%
