Question

You hear on the news that the​ S&P 500 was down 2.7 % today relative to the​ risk-free rate​ (the market's excess return was negative 2.7 % ). You are thinking about your portfolio and your investments in Zynga and Proctor and Gamble.

A. If Zynga beta is 1.3, what is your best guess as to Zynga's excess return today?B. If Proctor and Gamble beta is 0.4, What is your best guess as to P&G excess return today?Round answer to one decimal place

Answer 1

A. - 3.51 %

B. -1.1%

Step-by-step explanation:

From the information given:

the​ S&P 500 was down 2.7 % today relative to the​ risk-free rate

the market's excess return was - 2.7 %

A)

If Zynga beta = 1.3

what is your best guess as to Zynga's excess return.

The best guess to Zynga's excess return = Zynga beta × Market Excess Return

The best guess to Zynga's excess return = 1.3 × (- 2.7%)

The best guess to Zynga's excess return = −3.51 %

B.

If Proctor and Gamble beta is 0.4,

What is your best guess as to P&G excess return today?Round answer to one decimal place

The best guess as to P&G excess return today = Proctor and Gamble beta × Market Excess return

The best guess as to P&G excess return today = 0.4 ×(- 2.7%)

The best guess as to P&G excess return today = -1.08%

The best guess as to P&G excess return today = -1.1% to one decimal rate.