Author Question: Given the following information, determine which beta coefficient for Stock A is consistent with ... (Read 15 times)

karlynnae · **on:** Apr 25, 2021

Question 1

Consider the data on expected returns and betas for a variety of assets in the table below. What is the expected return on shares of Bank of America using the SML?

Asset	Expected Return	Beta
Bank of America		0.9
Risk Free Asset	4%	0
Market Portfolio	10%	1

◦ 5.4%
◦ 6.0%
◦ 8.2%
◦ 9.4%
◦ 11.2%

Question 2

Given the following information, determine which beta coefficient for Stock A is consistent with equilibrium: E(k_i) = 8.5%; k_F = 4%; E(k_M) = 12%.
◦ 0.80
◦ 1.26
◦ 0.56
◦ 1.10
◦ 1.00

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

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