Accounting assignment numericals: Numericals of characteristics of two securities

Accounting assignment numericals: Numericals of characteristics of two securities

1.         Consider the following information about the characteristics of two securities, A and B; the market portfolio, M; and the risk-free rate of return:Sample AssignmentSecurity           (Ri, RM)       (Ri)

A                     0.5                   0.4

B                     0.7                   0.8

                        E(RM) = 0.25              (RM) = 0.75             RF = 0.06

(Ri, RM) denotes the correlation between the returns on security i and the returns on the market portfolio; (Ri) denotes the standard deviation of the returns on security i, E(RM) denotes the expected return on the market portfolio; (RM) denotes the standard deviation of the returns on the market portfolio; and RF denotes the risk-free rate of return.

(a)        Calculate i (beta) for each of the following:

            (i)         Security A

            (ii)        Security B

(a)        Use

                        where,

                        (i)         cov(RA, RM) = = 0.15

                        (ii)        cov(RB, RM) = = 0.42

(b)        According to the Capital Asset Pricing Model (CAPM), what are the expected returns for securities A and B?Buy Sample Assignment(b)        Use E(Ri) = RF + bi[E(RM) – RF]

                                    E(RA) = 0.06 + .267[0.25- 0.06] = 0.11073

                                    E(RB) = 0.06 + 0.747[0.25- 0.06] = 0.20193

  If you want Accounting management Assignment Help study samples to help you write professional custom essay’s and essay writing help.

Receive assured help from our talented and expert writers! Did you buy assignment and assignment writing services from our experts in a very affordable price.

To get more information, please contact us or visit www.myassignmenthelp.Com

download-button                chat-new (1)