KIC000041 - r---:---I~_}>~.~::""'--"=

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Unformatted text preview: r---:---I~_}>~.~::""'--"= _~1:\9-.;:0<...o-e0t~::\ o/Y6-2/f:)=e.,Q13~'l/>/bIu/o-=',,~lfo8gn":...,t:~-=.~~~( )5 - ;:..tYY-.tlD _ .=.~-t.2~-~=1--0 0 l- .1%:~~I~- - - - ~ ~ - - - - l~ ~ ~ ~ I - - ,..,- - ~ - - - - ~ - - - - ~ - ~ - - ~ ~ - -IFinance 320Problem Set #51. Considerthe two (excess return) index model regressionresults for Stocks A and B.The risk-free rateoverthe periodwas6%, and the market'saveragereturnwas14%.Thestandarddeviationof themarketreturnis15.4%.Performanceis measuredusingan indexmodelregressionon excess returns.Stock AStockBIndex model regressionestimatesR2Residualstandarddeviation,O"eStandarddeviationof excess returns1%+1.2(RM - Rr)0.9265.2%19.3%2% + 0.8(RM-Rr)0.24521.6%24.9%Calculatethe followingstatisticsfor each stock:a.Alphab.Appraisalratioc.Sharpe ratio<I.Treynor ratio- M2e. ,IWhich stock is the best choice under the followingcircumstances?a.This is the only risky asset to be held by the investor....
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This note was uploaded on 09/07/2011 for the course FINANCE 320 taught by Professor Sapp during the Fall '10 term at Iowa State.

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KIC000041 - r---:---I~_}>~.~::""'--"=

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