Given the following information:
a)What are the average monthly returns on Stock X and the S&P TSX?
b)What are the standard deviations of the monthly returns on Stock X and the S&P TSX?
c)What is the covariance of the returns on Stock X and the S&P TSX?
d)What is the beta of Stock X?
e)What is the implied risk-free rate?
Definitions:
Common Stock
A type of security signifying ownership in a corporation and entitling the holder to a share of the company's profits, essentially a mode of holding equity in the corporation.
Dividend Growth Model
A method used to value a company's stock by using predicted dividends and factoring in the growth rate of the dividends.
Required Rate of Return
The lowest yearly percent gain anticipated by an investor from investing in a specific asset.
Preferred Stock Dividends
Dividends that are paid to holders of preferred shares, typically at a fixed rate and before any dividends are paid to common shareholders.
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