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Unformatted text preview: CAPM holds. What is the beta of TriStars stock? 3. How does the relationship between the average return and the historical volatility of individual stocks differ from the relationship between the average return and the historical volatility of large, well-diversified portfolios? 4. Suppose the beta for the Ross Corporation is 0.80. the risk-free rate is 6 percent, and the market risk premium is 8.5 percent. What is the expected return for the Ross Corporation? 5. A stock has a beta of 1.8. A security analyst who specializes in studying this stock expects its return to be 18 percent. Suppose the risk-free rate is 5 percent and the market-risk premium is 8 percent. Is the analyst pessimistic or optimistic about this stock relative to the market's expectations?...
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This note was uploaded on 11/22/2010 for the course FINANCE 300 taught by Professor Xiao during the Spring '10 term at UChicago.
- Spring '10