ASISTENSI INVESTASI DAN PASAR MODAL

PERTEMUAN 5
CAPITAL ASSET PRICING AND ARBITRAGE PRICING THEORY
TIM ASISTEN DOSEN

SOAL 1 – 7.4 & 7.5

Here are data on two companies. The T-bill rate is 5% and the market risk premium is 9.5%.
Company $1 Discount Store Everything $5
Forecast return 16% 16%
Standard deviation of returns 24% 26%
Beta 1.4 1.0

a. What would be the fair return for each company, according to the capital asset pricing
model (CAPM)?
b. Characterize each company above as underpriced, overpriced, or properly priced.

SOAL 2 – 7.9
What must be the beta of a portfolio with E(rp) = 12.7%, if rf = 5% and E(rm) = 12%?

SOAL 3 – 7.10
The market price of a security is $30. Its expected rate of return is 10%. The risk-free rate is 4%,
and the market risk premium is 8%. What will the market price of the security be if its beta
doubles (and all other variables remain unchanged)? Assume the stock is expected to pay a
constant dividend in perpetuity.

SOAL 4 – CFA 7.2

Karen Kay, a portfolio manager at Collins Asset Management, is using the capital asset pricing
model for making recommendations to her clients. Her research department has developed the
information shown in the following exhibit.
Forecasted Returns, Standard Deviations, and Betas
Forecasted Standard
Beta
Return Deviation
Stock X 14.0% 36% 0.8
Stock Y 17.0% 25% 1.5
Market index 14.0% 15% 1.0
Risk-free rate 5.0%

a. Calculate expected return and alpha for each stock.

b. Identify and justify which stock would be more appropriate for an investor who wants to:
i. Add this stock to a well-diversified equity portfolio.
ii. Hold this stock as a single-stock portfolio.
EKSTRA
For the problems below, assume the risk-free rate is 4% and the expected rate of return on the
market is 15%.
a. A share of stock is now selling for $70. It will pay a dividend of $8 per share at the end of
the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year?

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b. I am buying a firm with an expected perpetual cash flows of $600 but am unsure of its
risk. If I think the beta of the firm is zero, when the beta is really 1, how much more will I
offer for the firm than it is truly worth?
c. A stock has an expected return of 7%. What is its beta?