BUS 430 Finance Seminar Week 2 Discussion 2 Measuring Risk
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Measuring Risk. 1st Post Due by Day 3. Answer problem set number 13 from the end of Chapter 9. Respond to at least two of your classmates’ posts.
The following table shows estimates of the risk of two well-known Canadian Stocks:
Standard Deviation, %
|
R2
|
Beta
|
Standard Error of Beta
| |
Toronto Dominion Bank
|
25
|
.66
|
1.26
|
.09
|
Research in Motion
|
44
|
.08
|
.82
|
.25
|
• · What proportion of each stock's risk was market risk, and what proportion was specific risk?
• · What is the variance of Toronto Dominion? What is the specific variance?
• · What is the confidence interval on Research in Motion's beta?
• · If the CAPM is correct, what is the expected return on Toronto Dominion? Assume a risk-free interest rate of 5% and an expected market return of 12%.
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