Based on CAPM,
Expected return on stock = Risk free rate + Beta * Marker risk premium
Expected return on stock = 3% + 1.8 * 7%
Expected return on stock = 3% + 12.6% = 15.60%
3 Make-Up Masters stock has a beta of 1.8; the risk free rate is 3% and...
QUESTION 3 "Assume that Tesla common stock has a Beta of 1.2, the risk-free rate of interest is 3% and the market risk premium is 5%. According to the CAPM, what should be Investors required rate of return for Tesla stock? 9.00% 9.20 % 5.40% 15.20 % 12.60% QUESTION 4 "You expect Caterpillar will pay dividends of 2.25 in one year, 2.50 in two years, and 2.75 in three years. From that point onwards, dividends will grow at 7% per...
If the current risk-free rate is 6%; Stock A has a beta of 1.0; Stock B has a beta of 2.0; and the market risk premium, r M – r RF, is positive. Which of the following statements is CORRECT? a. If the risk-free rate increases but the market risk premium stays unchanged, Stock B's required return will increase by more than Stock A's. b. If Stock B's required return is 11%, then the market risk premium is 2.5%. c....
Google's stock has a beta of 1.53. The risk-free rate is 1.8% and the expected return on the market is 16.2%. What is the expected return on Google's stock?
Beta and required rate of return A stock has a required return of 13%; the risk-free rate is 3%; and the market risk premium is 3%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 10%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. If the stock's beta is equal to 1.0, then the change in required rate...
Beta and required rate of return A stock has a required return of 16%; the risk-free rate is 6.5%; and the market risk premium is 6%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 10%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. If the stock's beta is greater than 1.0, then the change in required rate...
A stock has a required return of 14%, the risk-free rate is 3%, and the market risk premium is 6%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 8%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. If the stock's beta is equal to 1.0,...
A stock has a required return of 9%, the risk-free rate is 3%, and the market risk premium is 5%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 9%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. If the stock's beta is less than 1.0,...
Calculate the required rate of return for ABC Corporation assuming that the real risk- free rate is 3% and that investors expect inflation to equal 3.5%. The market risk premium is estimated at 7% and the beta for ABC is 1.8. 3 points
A stock has a required return of 14%, the risk-free rate is 5.5%, and the market risk premium is 4%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. If the stock's beta is equal to 1.0,...
AA Corporation’s stock has a beta of 8. The risk-free rate is 4.5% and the expected return on the market is 13.6%. What is the required rate of return on AA’s stock? The market and Stock J have the following probability distributions: Probability rM rJ 0.2 12% 16% 0.3 8 7 0.5 20 13 Calculate the expected rates of return for the market and Stock J. Suppose you manage a $6 million fund that consists of four stocks with...