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24 March, 20:37

You hear on the news that the S&P 500 was down 2.9 % today relative to the risk-free rate (the market's excess return was negative 2.9 %). You are thinking about your portfolio and your investments in Zynga and Proctor and Gamble. a. If Zynga's beta is 1.3 , what is your best guess as to Zynga's excess return today? b. If Proctor and Gamble's beta is 0.4 , what is your best guess as to P&G's excess return today? a. If Zynga's beta is 1.3 , what is your best guess as to Zynga's excess return today? Zynga's excess return today is nothing %. (Round to one decimal place.) b. If Proctor and Gamble's beta is 0.4 , what is your best guess as to P&G's excess return today? Proctor and Gamble's excess return today nothing %. (Round to one decimal place.)

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  1. 24 March, 23:55
    0
    a) Excess return for Zynga = - 3.8%

    b) Excess return for Proctor and Gamble = - 1.2%

    Explanation:

    Given dа ta:

    Market excess return = - 2.9%

    Zynga's bet = 1.3

    Proctor and Gamble's beta = 0.4

    (a) Excess return for Zynga is calculated using the formula;

    Excess return for Zynga = Zynga beta * Market Excess return

    = 1.3 * ( - 2.9%)

    = - 3.77% = - 3.8%

    (b) Excess return for Proctor and Gamble can be calculated using the formula;

    Excess return for Proctor and Gamble = Proctor and Gamble beta * Market Excess return

    = 0.4 * ( - 2.9%)

    = - 1.16 % = - 1.2%
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