Stock Y has a beta of 1.2 and an expected return of 11.1 percent. Stock Z...
Stock Y has a beta of 1.2 and an expected return of 11.1 percent. Stock Z has a beta of .80 and an expected return of 7.85 percent. What would the risk-free rate have to be for the two stocks to be correctly priced? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Homework Answers
As per CAPM, return on stock = Risk free return + beta*market risk premium
11.1% = Risk free return + 1.2*Market risk premium
7.85% = Risk free return + 0.80*Market risk premium
Subtracting Equation 2 from 1
3.25% = 0.4*market risk premium
Market risk premium = 8.125%
Hence, risk free rate = 11.1% - 1.2*8.125% = 1.35%
Hence, required risk free rate for two stocks to be correctly priced = 1.35%
Add Answer to:
Stock Y has a beta of 1.2 and an expected return of 11.1
percent. Stock Z...
Stock Y has a beta of 1.2 and an expected return of 11.1 percent. Stock Z...
Stock Y has a beta of 1.2 and an expected return of 11.1 percent. Stock Z has a beta of .80 and an expected return of 7.85 percent. If the risk-free rate is 2.4 percent and the market risk premium is 7.2 percent, the reward-to-risk ratios for stocks Y and Z are 7.25 and ??????? percent, respectively. Since the SML reward-to-risk is 7.20 percent, Stock Y is undervalued and Stock Z is overvalued (Do not round intermediate calculations and enter...
Stock Y has a beta of 1.20 and an expected return of 11.4 percent. Stock Z...
Stock Y has a beta of 1.20 and an expected return of 11.4 percent. Stock Z has a beta of .80 and an expected return of 8 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate
Stock Y has a beta of 1.2 and an expected return of 14.5 percent. Stock Z...
Stock Y has a beta of 1.2 and an expected return of 14.5 percent. Stock Z has a beta of .7 and an expected return of 9.3 percent. If the risk-free rate is 5.6 percent and the market risk premium is 6.6 percent, the reward-to-risk percent, respectively. Since ratios for Stocks Y and Z are and the SML reward-to-risk is percent, Stock Y is and Stock Z is (Do not round intermediate calculations and enter your answers as a percent...
Stock Y has a beta of 1.4 and an expected return of 13 percent. Stock Z...
Stock Y has a beta of 1.4 and an expected return of 13 percent. Stock Z has a beta of 0.85 and an expected return of 10.4 percent. Required: What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Risk-free rate %
Stock Y has a beta of 1.2 and an expected return of 15.3 percent. Stock Z...
Stock Y has a beta of 1.2 and an expected return of 15.3 percent. Stock Z has a beta of 0.8 and an expected return of 10.7 percent. If the risk-free rate is 6 percent and the market risk premium is 7 percent, the reward-to-risk 7.75 and ratios for stocks Y and Z are 5.88 percent, respectively. Since the SML reward-to-risk is 7.0 percent, Stock Y is undervalued 16 overvalued (Do not round intermediate calculations and Stock Z is points...
tock Y has a beta of 1.4 and an expected return of 17 percent. Stock Z...
tock Y has a beta of 1.4 and an expected return of 17 percent.
Stock Z has a beta of .7 and an expected return of 10.1 percent. If
the risk-free rate is 6 percent and the market risk premium is 7.2
percent, the reward-to-risk and ratios for Stocks Y and Z are
percent, respectively. Since the SML reward-to-risk is percent,
Stock Y is and Stock Z is (Do not round intermediate calculations
and enter your answers as a percent...
Stock Y has a beta of 1.4 and an expected return of 13 percent. Stock Z...
Stock Y has a beta of 1.4 and an expected return of 13 percent. Stock Z has a beta of 0.85 and an expected return of 10.4 percent. Required: What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Risk-free rate % Suggestions: We need to set the reward-to-risk ratios of the...
Stock Y has a beta of 1.30 and an expected return of 13.35 percent. Stock Z...
Stock Y has a beta of 1.30 and an expected return of 13.35 percent. Stock Z has a beta of 0.50 and an expected return of 8 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Risk-free rate
Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z...
Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of.7 and an expected return of 8.6 percent. If the risk-free rate is 5 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for Stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, Stock Y is and Stock Z is (Do not round intermediate calculations and enter your answers as a percent rounded...
Stock Y has a beta of 1.2 and an expected return of 11.4%. Stock Z has...
Stock Y has a beta of 1.2 and an expected return of 11.4%. Stock Z has a beta of 0.80 and an expected return of 8.06%. What would the risk-free rate have to be for the two stocks to be correctly priced? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Risk-free rate
Stock Y has a beta of 1.20 and an expected return of 11.4 percent. Stock Z has a beta of .80 and an expected return of 8 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate
Stock Y has a beta of 1.2 and an expected return of 14.5 percent. Stock Z has a beta of .7 and an expected return of 9.3 percent. If the risk-free rate is 5.6 percent and the market risk premium is 6.6 percent, the reward-to-risk percent, respectively. Since ratios for Stocks Y and Z are and the SML reward-to-risk is percent, Stock Y is and Stock Z is (Do not round intermediate calculations and enter your answers as a percent...
Stock Y has a beta of 1.2 and an expected return of 15.3 percent. Stock Z has a beta of 0.8 and an expected return of 10.7 percent. If the risk-free rate is 6 percent and the market risk premium is 7 percent, the reward-to-risk 7.75 and ratios for stocks Y and Z are 5.88 percent, respectively. Since the SML reward-to-risk is 7.0 percent, Stock Y is undervalued 16 overvalued (Do not round intermediate calculations and Stock Z is points...
tock Y has a beta of 1.4 and an expected return of 17 percent.
Stock Z has a beta of .7 and an expected return of 10.1 percent. If
the risk-free rate is 6 percent and the market risk premium is 7.2
percent, the reward-to-risk and ratios for Stocks Y and Z are
percent, respectively. Since the SML reward-to-risk is percent,
Stock Y is and Stock Z is (Do not round intermediate calculations
and enter your answers as a percent...
Stock Y has a beta of 1.30 and an expected return of 13.35 percent. Stock Z has a beta of 0.50 and an expected return of 8 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Risk-free rate
Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of.7 and an expected return of 8.6 percent. If the risk-free rate is 5 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for Stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, Stock Y is and Stock Z is (Do not round intermediate calculations and enter your answers as a percent rounded...
Stock Y has a beta of 1.2 and an expected return of 11.4%. Stock Z has a beta of 0.80 and an expected return of 8.06%. What would the risk-free rate have to be for the two stocks to be correctly priced? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Risk-free rate
Most questions answered within 3 hours.
-
Engineers must consider the breadths of male heads when
designing helmets. The company researchers have determined...
asked 4 minutes ago -
In the Williamson Ether Synthesis of Phenacetin from
Acetaminophen, sodium methoxide in methanol and 100% ethanol...
asked 8 minutes ago -
If the spin of the earth suddenly changed to spin in the
opposite direction, what effect...
asked 22 minutes ago -
An orb weaver spider with a mass of 0.23 grams hangs vertically
by one of its...
asked 18 minutes ago -
Determine the sample size required to estimate the mean score on
a standardized test within
2...
asked 40 minutes ago -
The idea that one can remain relatively 'anonymous' on the
internet if they so choose, for...
asked 27 minutes ago -
In the reaction of N2 and H2 to produce
NH3, how many moles of H2 will...
asked 28 minutes ago -
When a certain coin is flipped, the probability of
obtaining a tails is 0.55. Which of...
asked 26 minutes ago -
Can you show how a sulfonic acid group
is introduced into an aromatic ring by Friedal...
asked 31 minutes ago -
Implement the Smith-Waterman algorithm in C that accepts a
substitution matrix.
You may assume the substitution...
asked 31 minutes ago -
The equilibrium constant Kp for the reaction
C(s)+H2O(g)⇌CO(g)+H2(g) is 2.44 at 1000 K. What are the...
asked 43 minutes ago -
HACKING
1: Discuss the tricks of hacking in 300 words.
2: Explain in you own words...
asked 44 minutes ago