Exercice 5 ( Answer question 4 to 6) The expected return on treasury bills E(RF)= 4% Calculate the expected return E(.) for the market portfolio, the FGL security and the SDL Calculate the variance and standard deviation for the market portfolio, FGL security and SDL Calculate the covariance between the market portfolio and the FGL security, and the covariance between the market portfolio and the SDL Calculate the correlation coefficient between the market portfolio and the FGL security, and the correlation coefficient between the market portfolio and the SDL security. Calculate the beta of FGL stock relative to the market portfolio with two different methods. Calculate the beta of the SDL stock relative to the market portfolio with two different Calculate the expected return of the Pfl portfolio composed of 70% FGL stock and 30% SDL stock, what is the beta of this portfolio? Using CAPM assess the performance of FGL and SDL securities, Are they overvalued or undervalued? Which of these two securities would you recommend selling if held, and which would you recommend buying?
Exercice 5 ( Answer question 4 to 6) The expected return on treasury bills E(RF)= 4% Calculate the expected return E(.) for the market portfolio, the FGL security and the SDL Calculate the variance and standard deviation for the market portfolio, FGL security and SDL Calculate the covariance between the market portfolio and the FGL security, and the covariance between the market portfolio and the SDL Calculate the correlation coefficient between the market portfolio and the FGL security, and the correlation coefficient between the market portfolio and the SDL security. Calculate the beta of FGL stock relative to the market portfolio with two different methods. Calculate the beta of the SDL stock relative to the market portfolio with two different Calculate the expected return of the Pfl portfolio composed of 70% FGL stock and 30% SDL stock, what is the beta of this portfolio? Using CAPM assess the performance of FGL and SDL securities, Are they overvalued or undervalued? Which of these two securities would you recommend selling if held, and which would you recommend buying?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Exercice 5 ( Answer question 4 to 6)
The expected return on treasury bills E(RF)= 4%
- Calculate the expected return E(.) for the market portfolio, the FGL security and the SDL
- Calculate the variance and standard deviation for the market portfolio, FGL security and SDL
- Calculate the covariance between the market portfolio and the FGL security, and the covariance between the market portfolio and the SDL
- Calculate the correlation coefficient between the market portfolio and the FGL security, and the correlation coefficient between the market portfolio and the SDL security.
- Calculate the beta of FGL stock relative to the market portfolio with two different methods.
- Calculate the beta of the SDL stock relative to the market portfolio with two different
- Calculate the expected return of the Pfl portfolio composed of 70% FGL stock and 30% SDL stock, what is the beta of this portfolio?
- Using
CAPM assess the performance of FGL and SDL securities, Are they overvalued or undervalued? - Which of these two securities would you recommend selling if held, and which would you recommend buying?
Transcribed Image Text:High increase
Steady growth
Low growth
Probability Yield
of
achievement
25%
50%
25%
Market
12%
10%
06%
FGL
18%
16%
12%
SDL
10%
12%
14%
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