a. What impact would a 199% increase in the market return be expected to have on

Question

a. What impact would a 199% increase in the market return be expected to have on each assets return? b. What impact would a 11% decrease in the market return be expected to have on each asset's return? c. If you believed that the market return would increase in the near future, which asset would you prefer? d. If you believed that the market retun would decrease in the near future, which asset would you prefer? a. If the market return increased by 19%, the impact to the return of asset A is If the market return increased by 19%, the impact to the return of asset B is lf the market return increased by 19%, te impact to the return of asset C s ?% If the market return increased by 19%, the impact to the return of asset D is [ 96. b. If the market return decreased by 11%, te impact to the return of asset A is If the market return decreased by 11%, the impact to the return of asset B is If the market return decreased by 11%, the impact to the return of asset C is if the market return decreased by 11%, the impact to the return of asset D is O Data Table CC ck on the icon copy its contents into a spreadsheet) cated on the to ight corner or the data table below in order to Beta D -0.4 1.6 0.4 1.7 Asset Print Done

Explanation / Answer

A)
The impact on increase in market return by 19% on the given asset is
Asset return = Increasae in market return * beta of asset
For Asset A
Asset A return = 19 * -0.4 = -7.6
The 19% increase in market return will bring 7.6% decrease in asset return.
Asset B return = 19 * 1.6 = 30.4
The 19% increase in market return will bring 30.4% increase in asset return.
Asset C return = 19 * 0.4 = 7.6
The 19% increase in market return will bring 7.6% increase in asset return.
Asset D return = 19 * 1.7 = 32.3
The 19% increase in market return will bring 32.3% increase in asset return.

B)
The impact on Decrease in market return by 11% on the given asset is
Asset return = Decreasae in market return * beta of asset
For Asset A
Asset A return = 11 * -0.4 = 4.4%
The 11% increase in market return will bring 4.4% Increase in asset return.
Asset B return = 11 * 1.6 = -17.6%
The 11% increase in market return will bring 17.6% Decrease in asset return.
Asset C return = 11 * 0.4 = -4.4%
The 11% increase in market return will bring 4.4% Decrease in asset return.
Asset D return = 11 * 1.7 = -18.7%
The 11% increase in market return will bring 18.7% Decrease in asset return.

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