Risk and Return

Risk and Return 150 150 Affordable Capstone Projects Written from Scratch

Work out this exercise on risk and return. Suppose you observe the following situation as depicted in the table below. If the risk-free rate is 8%, are these securities correctly priced? What would the risk-free rate have to be if they are correctly priced?

 

SECURITY BETA EXPECTED RETURN
Cooley, Inc. 1.6 19%
Moyer Co. 1.2 16%

 

4. Which stock has the highest and lowest betas? Go to www.finance.yahoo.com and locate the Stock Screener. Enter 0 as the maximum value. How many stocks have a beta less than zero? Which stock has the lowest beta? Go back to the screener and enter 3 as the minimum value. How many stocks have a beta greater than 3? Formulate your research into a report of your findings.


 

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