Review the excerpted table of historic returns shown below. The returns have all been annualized after having calculated monthly returns for the previous five years. In addition, information is provided about the average, the volatility, and the sensitivity of the possible investments. Time Period # Market Return Firm W Firm X Firm Y Firm Z T-Bill 1 0.333 0.191 0.218 0.955 0.601 0.035 2 -0.144 -0.423 -0.632 -0.747 -0.472 0.039 3 0.143 0.348 0.470 0.379 0.378 0.040 4 0.316 0.871 0.868 -0.192 0.502 0.036 5 0.178 0.912 0.499 0.694 0.364 0.036 6 -0.014 0.532 0.168 -0.671 -0.064 0.038 … … … … … … … … … … … … … … 59 0.374 0.556 1.014 0.023 0.698 0.037 60 0.173 0.547 0.092 0.658 0.222 0.036 Average Return 0.082 0.113 0.067 0.167 0.121 0.029 Standard Deviation 0.156 0.369 0.497 0.398 0.456 0.011 Beta 1.00 1.21 0.89 1.41 1.25 0.00 Firm Z has a Debt/Equity Ratio of 0.25 and a Tax Rate of 20%. What is the beta of a project (rounded to two places) if said project is twice as risky as typical Firm Z projects? Multiple Choice 2.50 2.08 1.21 1.61 none of the choices are correct
Review the excerpted table of historic returns shown below. The returns have all been annualized after having calculated monthly returns for the previous five years. In addition, information is provided about the average, the volatility, and the sensitivity of the possible investments.
|
Time Period # |
Market Return |
Firm W |
Firm X |
Firm Y |
Firm Z |
T-Bill |
|
1 |
0.333 |
0.191 |
0.218 |
0.955 |
0.601 |
0.035 |
|
2 |
-0.144 |
-0.423 |
-0.632 |
-0.747 |
-0.472 |
0.039 |
|
3 |
0.143 |
0.348 |
0.470 |
0.379 |
0.378 |
0.040 |
|
4 |
0.316 |
0.871 |
0.868 |
-0.192 |
0.502 |
0.036 |
|
5 |
0.178 |
0.912 |
0.499 |
0.694 |
0.364 |
0.036 |
|
6 |
-0.014 |
0.532 |
0.168 |
-0.671 |
-0.064 |
0.038 |
|
… |
… |
… |
… |
… |
… |
… |
|
… |
… |
… |
… |
… |
… |
… |
|
59 |
0.374 |
0.556 |
1.014 |
0.023 |
0.698 |
0.037 |
|
60 |
0.173 |
0.547 |
0.092 |
0.658 |
0.222 |
0.036 |
|
Average Return |
0.082 |
0.113 |
0.067 |
0.167 |
0.121 |
0.029 |
|
Standard Deviation |
0.156 |
0.369 |
0.497 |
0.398 |
0.456 |
0.011 |
|
Beta |
1.00 |
1.21 |
0.89 |
1.41 |
1.25 |
0.00 |
Firm Z has a Debt/Equity Ratio of 0.25 and a Tax Rate of 20%.
What is the beta of a project (rounded to two places) if said project is twice as risky as typical Firm Z projects?
Multiple Choice
-
2.50
-
2.08
-
1.21
-
1.61
-
none of the choices are correct
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