View the step-by-step solution to:

# Problem 6-13 TUTOR WILL YOU PLACE THE HOMEWORK ON A EXCEL SPREADSHEET , THANK YOU&quot; Historical Returns:

Problem 6-13 TUTOR WILL YOU PLACE THE HOMEWORK ON A EXCEL SPREADSHEET , THANK YOU"
Historical Returns: Expected and Required Rates of Return

You have observed the following returns over time
Year Stock X Stock Y Market
2006 14% 11% 12%
2007 18 6 8
2008 -12 -8 -13
2009 5 2 2
2010 18 12 12
Assume that the risk-free rate is 3% and the market risk premium is 14%

QUESTION: What is the required rate of return on Stock X? Round your answer to two decimal places.
_____________ %

What is the required rate of return on Stock Y? Round your answer to two decimal places.

______________

You have observed the following returns over time
Year
2006
2007
2008
2009
2010
Covariance
Market variance =
beta =
a) Stock X
Stock Y
Market
14%
11%
18%
6%
-12%
-8%
5%
2%
8%
12%
0.008708 0.006708...

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

### -

Educational Resources
• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents