question archive (6—13) :ricol Returns: xpecred ond lire-d Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2006 14% 13% 12% 200? 19 3' 10 2008 —10 —5 —12 2009 3 1 1 2010 20 11 15 Assume that the risk—free rate is 6% and the market risk premium is 5%
(6—13) :ricol Returns: xpecred ond lire-d Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2006 14% 13% 12% 200? 19 3' 10 2008 —10 —5 —12 2009 3 1 1 2010 20 11 15 Assume that the risk—free rate is 6% and the market risk premium is 5%
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(6—13) :ricol Returns: xpecred ond lire-d Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2006 14% 13% 12% 200? 19 3' 10 2008 —10 —5 —12 2009 3 1 1 2010 20 11 15 Assume that the risk—free rate is 6% and the market risk premium is 5%. acts» ('1 What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? . What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? If Stock X's expected return is 22%, is Stock X under- or overvalued?
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