Do Homework - Cristian Clementi - Google Chrome Secure | https://www.mathxl.com

Question

Do Homework - Cristian Clementi - Google Chrome Secure | https://www.mathxl.com yerHomework.aspx?homeworkId=448 577573 &questionld; = 1 &flushed; = false&cld-4704237;&centerwin; =yes FIN-350-MWF1230A-Fundamentals of Business Financs Cristian Clementi 12/3/17 7:11 PM Homework: Module 7, Chapter 8 Score: 0 of 5 pts P8-18 (similar to) 5 of 8 (1 complete HW Score: 10.42%, 4.17 of 40 pts Question Help Graphical derivation of beta Afrm wishes to estimate graphically the betas for two assets, A and B. It has gathered the return data shown in the following table for the market portrolio and for both assets over the last 10 years, 2006-2015 a. Which of the fol lowing graphs represents the graphical derivation of beta for assets A and B? b. Use the characteristic lines from part a to estimate the betas for assets A and B c. Use the betas found in part b to comment on the relative risks of assets A and B. Data Table (Click on the icon located on the top-right coner of the data table below in ordi to copy its contents into a spreadsheet) Annual retun Market portfolio AssetA 20 -15 20-15 0 15 20 Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Asset B 19% 15% 16% 9% 13% -5% 096 -2% 6% 10% 16% 13% 28% 22% 14% 18% 20% -2% 2% -8% -Asset A Asset B Asset A Asset B 14% 12% -5% -996 -12% 4% 896 Market Reum (%) Market Return(%) O C. D. Beta Derivation Beta Derivation 13% Print Done 15 20 -20-1510 15 Click to select your answer and then click Check Answer Clear All Final Check emaining O Type here to search 7:11 PM 12/3/2017

Explanation / Answer

a) A is the correct chart.

Let's look at three points.

Market Returns - 16%, Asset A - 28% and Asset B - 19%

Market - -5%, A -2% and B -5%

Market - 12%, A -8% and B -2%

b) Beta is the slope of these lines.

Beta for A = Change in Asset A / Change in Market = (28% - -8%) / (16% - -12%) = 1.29

Beta for B = (19% - -2%) / (16% - -12%) = 0.75

c) As beta for A is greater than that for B, Asset A is more riskier than Asset B.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.