See attached file.
8- 1 EXPECTED RETURN
A stock's returns have the following distribution:
Calculate the stock's expected return, standard deviation, and coefficient of variation.
8- 3 REQUIRED RATE OF RETURN
Assume that the risk- free rate is 6% and the expected return on the market is 13%. What is the required rate of return on a stock with a beta of 0.7?
8- 5 BETA AND REQUIRED RATE OF RETURN
A stock has a required return of 11%, the risk- free rate is 7%, and the market risk premium is 4%. a. What is the stock's beta? b. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? Assume that the risk- free rate and the beta remain unchanged.
8- 7 PORTFOLIO REQUIRED RETURN
Suppose you are the money manager of a $ 4 million investment fund. The fund consists of four stocks with the following investments and betas:
If the market's required rate of return is 14% and the risk- free rate is 6%, what is the fund's required rate of return?
8- 11 CAPM AND REQUIRED RETURN
Calculate the required rate of return for Manning Enterprises assuming that investors expect a 3.5% rate of inflation in the future. The real risk- free rate is 2.5%, and the market risk premium is 6.5%. Manning has a beta of 1.7, and its realized rate of return has averaged 13.5% over the past 5 years.
The solution explains various calculation relating to expected stock return, required rate of return, beta, portfolio return and CAPM
FedEx Case Study Questions: Why did stock decline at the J.C. Penney announcement?
(See attached file for full problem description)
1. Why did FedEx's stock decline at the J.C. Penney announcement?
2. Describe the competition in the overnight package delivery industry, and the strategies by which these two firms are meeting the competition. Do you think either firm can attain sustainable competitive advantage in this business?
3. How have FedEx and UPS performed since the mid-1980s? Which firm is doing better? Analyze in depth to discuss all insights you obtained from these firms' financial statements, ratios, stock price performance, and EVA. In your opinion, which firm is "excellently" managed?