lOMoARcPSD B Beta represents the amount by which risks that affect the overall

Lomoarcpsd b beta represents the amount by which

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D Consider the following linear regression model, which regresses returns of stock XYZ on the market excess return over time periods indexed by t(RXYZt- rf) = a+ b(RMktt- rf) + Here, ais the regression intercept and bthe slope coefficient. 16) The etin the regression : e t, B Consider the following information regarding corporate bonds: Rating AAA AA A BBBBBBAverage Default Rate0.0% 0.1% 0.2% 0.5% 2.2% 5.5% Recession Default Rate0.0% 1.0% 3.0% 3.0% 8.0% 16.0% Average Beta0.05 0.05 0.05 0.10 0.17 0.26 17) Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders' expected loss rate in the event of default is 70%. Assuming the economy is in recession, the expected return on Wyatt Oil's debt is closest to: CCC 12.2% 48.0% 0.31 B Chapter 13 Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 12% volatility and the risk-free rate is 3%. Now news arrives that does not change any of these numbers, but the expected return of the following stocks becomes: Stock Expected Return Volatility Beta Taggart Transcontinental 8% 28% Wyatt Oil 7% 20% Verspreiden niet toegestaan | Gedownload door Robbert Bon ([email protected]) 1.2 0.8 lOMoARcPSD
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18) The expected alpha for Wyatt Oil is now closest to: A) -3.00% B) -1.00% C) 0.00% D) 3.00% Answer: Explanation: C) αi= E[rs] - rf- βi(rm- rf), where rf- βi(rm- rf) is the CAPM return C 19) Which of the following is FALSE regarding individual investor behavior? D
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