Question

Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 12%. A stock has an expecte

1 0
Add a comment Improve this question Transcribed image text
Answer #1

Expected return = Risk free rate + beta(market return - risk free rate)

0.07 = 0.06 + beta(0.12 - 0.06)

0.07 = 0.06 + beta 0.06

0.01 = beta 0.06

Beta = 0.17

Add a comment
Know the answer?
Add Answer to:
Assume that the risk-free rate of interest is 6% and the expected rate of return on...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Assume that the risk-free rate of interest is 4% and the expected rate of return on thee market is 14%. A stock has an...

    Assume that the risk-free rate of interest is 4% and the expected rate of return on thee market is 14%. A stock has an expected rate of return of 5%. What is its beta? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Beta

  • A stock has an expected return of 9%. What is its beta? Assume the risk-free rate...

    A stock has an expected return of 9%. What is its beta? Assume the risk-free rate is 6% and the expected rate of return on the market is 12%. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Problem 7-23 A stock has an expected return of 9%. What is its beta? Assume the risk-free rate is 6% and the expected rate of return on the market is 12%. (Negative value should be...

  • Assume that the risk-free rate of interest is 4% and the expected rate of return on...

    Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 16%. A share of stock sells for $63 today. It will pay a dividend of $3 per share at the end of the year. Its beta is 1.1. What do investors expect the stock to sell for at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  • Assume that the risk-free rate of interest is 4% and the expected rate of return on...

    Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 14%. I am buying a firm with an expected perpetual cash flow of $3,000 but am unsure of its risk. If I think the beta of the firm is 0.5, when in fact the beta is really 1, how much more will offer for the firm than it is truly worth? (Do not round intermediate calculations. Round your answer to 2...

  • Assume that the risk-free rate of interest is 5% and the expected rate of return on the market is 17%. A share of stock...

    Assume that the risk-free rate of interest is 5% and the expected rate of return on the market is 17%. A share of stock sells for $51 today. It will pay a dividend of $5 per share at the end of the year. Its beta is 1.1. What do investors expect the stock to sell for at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected stock price

  • A stock has a beta of 1.15 and an expected return of 11.4 percent. A risk-free...

    A stock has a beta of 1.15 and an expected return of 11.4 percent. A risk-free asset currently earns 3.5 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b.If a portfolio of the two assets has a beta of 7 what are the portfolio weights? (Do not round intermediate calculations and...

  • A stock has a beta of 1.37 and an expected return of 13.5 percent. A risk-free...

    A stock has a beta of 1.37 and an expected return of 13.5 percent. A risk-free asset currently earns 4.65 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of .97, what are the portfolio weights? (Do not round intermediate calculations...

  • A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free...

    A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset currently earns 3.85 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return             % b. If a portfolio of the two assets has a beta of .81, what are the portfolio weights? (Do...

  • A stock has a beta of 1.05 and an expected return of 11 percent. A risk-free...

    A stock has a beta of 1.05 and an expected return of 11 percent. A risk-free asset currently earns 2.4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of.63, what are the portfolio weights? (Do not round intermediate calculations and...

  • A stock has a beta of 1.23 and an expected return of 12.1 percent. A risk-free asset currently earns 3.95 percent Requi...

    A stock has a beta of 1.23 and an expected return of 12.1 percent. A risk-free asset currently earns 3.95 percent Required: (a) What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return (b) If a portfolio of the two assets has a beta of 0.83, what are the portfolio weights? (Do not round...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT