Estimate expected returns, find the beta and return on fund

Estimate expected returns and find the beta and the return on the fund.

1. You use a factor model to estimate expected returns on Daemon stock. The risk-free rate is 3%. You have the following information:
Factor Factor Beta Risk Premium
GNP .80 .49%
Inflation 1.20 -.83%
Market .45 6.36%

2. Honest Dave's Used Mutual Fund has a $200 million portfolio invested in the following stocks:
Stock Investment Beta
Fraud Motors 60M 0.5
BIM 50M 2.0
Motel Electronics 30M 4.0
Major Foods 40M 1.0
William Television Company 20M 3.0

a) The expected risk-free rate is 4% and the expected return on the market is 16%. Find the beta and the return on the fund.

b) Suppose management receives a proposal to purchase a new stock. The investment needed to take a position in the stock is 50 million; it will have an expected return of 18% and its estimated beta coefficient is 2.50. Should the stock be purchased? At what expected return would management be indifferent to purchasing the stock?

The solution carefully presents the formulas and calculation to understand the answers to the problem. There is a short paragraph of narrative in response to part b.

CAPM, PORTFOLIO RISK, ANDRETURN
Consider the following information for three stocks, Stocks X, Y, and Z. Thereturns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.)
Stock ExpectedReturn Standard Deviation Beta
X

1. Find a low-risk stock -
Walmart or Kellogg would be a good candidate but any are welcome. Use monthly returns for the most recent three years to confirm that thebeta is less than 1.0. Now estimatethe annual standard deviation for the stock andthe S&P index, andthe correlation between thereturns on the stock andthe i

Lancelot Fund Management has found the Holy Grail; a mean-variant efficient portfolio of stocks with an expectedreturn of 25% p.a., a beta of 1.5 and a standard deviation of expectedreturns of 20% p.a. If the risk free rate is 7% p.a., deduce theexpected market returnand standard deviation.

Theexpected standard deviation of market returns is 0.20. Sandra has the following four stocks:
Security Standard Dev. Correlation with the Market
A .30 .70
B .75 .30
C

The assets of a particular investment fund are:
Stock A with an Investment of $200,000 and a beta of 1.50. Stock B with an Investment of $300,000 and a beta of -0.50. Stock C with an Investment of $500,000 and a beta of 1.25. Stock D with an Investment of $1,000,000 and a beta of 0.75.
The required market rate of return is

(Betaand required return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here.
a. Calculate theexpectedreturns on the stock market and on Chicago Gear stock.
b. What is Chicago Gear's beta?
c. What is Chicago Gear's required return according to the CAPM?

Look at attached document.
8-1 EXPECTEDRETURN A stock's returns have the following distribution:
Calculate the stock's expectedreturn, standard deviation, and coefficient of variation.
8-3 REQUIRED RATE OF RETURN Assume that the risk-free rate is 6% andtheexpectedreturn on the market is 13%. What is the requ

1. You own a stock portfolio invested 25% in stock Q, 20% in stock R, 15% in stock S, and 40% in stock T. Thebetas for these stocks are .84, 1.17, 1.11, and 1.36 respectively. What is the portfolio beta?
2. (Using CAPM) A stock has a beta of 1.05, theexpectedreturn on the market is 11 % andthe risk-free rate is 5.2 %.