Author Question: You have been asked to analyze two stocks, Stock A and Stock B. The beta of stock A is 1.2, and the ... (Read 37 times)

RYAN BANYAN · **on:** Apr 25, 2021

Question 1

XYZ Corp has an expected return of 16%. If the risk free rate is 4.5% and the return for the market is 20%, calculate the Beta for XYZ.
◦ 1.35
◦ 0.86
◦ 0.74
◦ 1.12
◦ 0.95

Question 2

You have been asked to analyze two stocks, Stock A and Stock B. The beta of stock A is 1.2, and the beta of stock B is 0.8. The expected return on stock A is 13.5%, the expected return on stock B is 11.0% and the risk-free rate is 7%. We also know that stock A is fairly priced. Which of the following regarding Stock B must be TRUE?
◦ The expected return on stock A is too high.
◦ Stock B is also fairly priced.
◦ The price of stock B is too high.
◦ The expected return on stock B is too high.

Mholman93 · **Reply #1 on:** Apr 25, 2021

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