Risk & Return:
Scenarios: Probabilities: Returns:
A 0.10 (0.10)
B 0.10 0.02
C 0.40 0.05
D 0.25 0.07
E 0.15 0.14
Problem 1: Calculate the expected return to the nearest basis point.
Problem 2: Calculate the standard deviation to the nearest basis point.
Problem 3: CAPM: If the risk-free rate is 0.02, the return of the market is 0.07, and the beta of the stock is 1.2, what is the return of the stock?
Problem 4: CAPM: If the risk-free rate is 0.02, the market risk premium is 0.07, and the beta of the stock is 1.2, what is the return of the stock?
Problem 5: CAPM: If the risk-free rate is 0.02, the return of the stock is 0.20, and the beta of the stock is 1.2, what is the return of the market?
Problem 6: CAPM: If the risk-free rate is 0.02, the return of the stock is 0.18, and the return of the market is 0.10, what is the beta of the stock?
Problem 7: CAPM: If the risk-free rate is 0.02, the return of the stock is 0.18, and the market-risk premium is 0.10, what is the beta of the stock?
Please show all of your calculations in MS Excel in order to earn credit.
Please bring out the decimals to the fourth decimal place, which is to the nearest basis point.
Please make sure to label all sections of your answers.