Unit 4 Assignment

 Unit 4 Assignment Composition

Tamisha McQuilkin

Device 4 Project

GB550 Economical Management

Doctor Prondzinski

May well 17, 2011

24-2

Secureness A has a expected price of go back of 6%, a standard deviation of earnings of 30%, a relationship coefficient with all the market of -0. twenty-five, and a beta coefficient of -0. 5. Reliability B has an expected go back of 11%, a standard change of returns of 10%, a relationship with the market of. seventy five, and a beta pourcentage of 0. 5. Which security is somewhat more risky? How come? Using SML: rA= rrf + (rm – rrf)bi

Security A is riskier because of its unfavorable correlation towards the market. Likewise its beta is bad causing to believe its risk will increase over time. 24-8

You are given the next set of data:

Historical Costs of Return| |

Year| NYSE| Stock Y

1| 5. 0%| three or more. 0%

2| 14. 3| 18. two

3| 19| 9. you

4| -14. 7| -6. 0

5| -26. 5| -15. three or more

6| 37. 2| thirty-three. 1

7| 23. 8| 6. 1

8| -7. 2| several. 2

9| 6. 6| 14. almost eight

10| twenty. 5| 24. 1

11| 30. 6| 18. zero

| Imply = on the lookout for. 8%| being unfaithful. 8%

| Пѓ = 19. 6%| 13. 8%

a. Create a scatter diagram displaying the relationship between returns in Stock Sumado a and the industry. Use a schedule or a calculator with a thready regression function to estimation beta.

ОІ = zero. 62

b. Offer a verbal meaning of what the regression collection and the beta coefficient display about stock Y's unpredictability and comparative risk as compared with the ones from other stocks and shares. This chart shows that stock Y's volatility follows the essential trend in the market (NYSE). The regression line and beta pourcentage shows a good correlation among stock Sumado a and the market with a great upward trending regression collection and confident beta coefficient of zero. 62. Also, the plots of stock Y sit closer to the regression line than the industry leading to assume that stock Sumado a is less risky than the different stocks on the market. c. Presume the regression lines had been exactly as displayed by your chart from portion b nevertheless the scatter of points were more disseminate. How will this...

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