Homework Answers
As per CAPM, Expected Return = Risk free rate + beta*market risk premium
19% = Risk free rate + 1.6*Market risk premium
16% = risk free rate + 1.2*Market risk premium
Subtracting 2 from 1,
3% = 0.4*Market risk premium
Market risk premium = 7.5%
Hence, risk free rate = 7%
Hence, the answer is 7%
Add Answer to:
Suppose you observed the following situation: Security Beta Expected Return Cooley, Inc. 1.6 19% Moyer Co....
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. Repete Co. 1.25 .85...
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. Repete Co. 1.25 .85 13.28% 10.12 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?
Suppose you observe the following situation: Security Peat Co. Re-Peat Co. Beta 1.70 0.85 Expected Return...
Suppose you observe the following situation: Security Peat Co. Re-Peat Co. Beta 1.70 0.85 Expected Return 13.6 10.8 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected return on market Risk-free rate
Suppose you observe the following situation: Security Beta Expected Return Peat Co. 1.15 10.0 Re-Peat Co....
Suppose you observe the following situation: Security Beta Expected Return Peat Co. 1.15 10.0 Re-Peat Co. 0.90 9.0 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected return on market % Risk-free rate %
Suppose you observe the following situation: Security Peat Co Re-Peat Co. Beta 1.60 0.85 Expected Return...
Suppose you observe the following situation: Security Peat Co Re-Peat Co. Beta 1.60 0.85 Expected Return 13.4 10.7 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct Expected return on market Risk-free rate 3.500% 11.24 01%
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.25 .94 Expected return...
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.25 .94 Expected return 13.50% 10.80 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Expected return on market O % What is the risk-free rate? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Risk-free rate 0 %
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.20 .89 Expected Return...
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.20 .89 Expected Return .130 .103 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,...
Suppose you observe the following situation: Security Pete Beta 1.25 Expected Return .1323 Corp. Repete Co....
Suppose you observe the following situation: Security Pete Beta 1.25 Expected Return .1323 Corp. Repete Co. .87 .0967 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b.What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)...
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.30 .140 Repete Co....
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.30 .140 Repete Co. .99 .113 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
CAPM Question Problem 1 (15pts). Given the following data: Security Beta Expected Return 1.3 20% 0.8...
CAPM Question
Problem 1 (15pts). Given the following data: Security Beta Expected Return 1.3 20% 0.8 14% 18% 1.2 (a) (10pts). Assume Securities 1 and 2 are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (b) (5pts). Would you recommend buying Security 3 according to CAPM? Why or why not?
Stock X has a beta of 1.6 and an expected return of 18.2 percent. Stock Y...
Stock X has a beta of 1.6 and an expected return of 18.2 percent. Stock Y has a beta of 1.19 and an expected return of 15.49 percent. What is the risk-free rate if these securities both plot on the security market line?
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. Repete Co. 1.25 .85 13.28% 10.12 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?
Suppose you observe the following situation: Security Peat Co. Re-Peat Co. Beta 1.70 0.85 Expected Return 13.6 10.8 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected return on market Risk-free rate
Suppose you observe the following situation: Security Peat Co Re-Peat Co. Beta 1.60 0.85 Expected Return 13.4 10.7 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct Expected return on market Risk-free rate 3.500% 11.24 01%
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.25 .94 Expected return 13.50% 10.80 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Expected return on market O % What is the risk-free rate? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Risk-free rate 0 %
Suppose you observe the following situation: Security Pete Corp. Repete Co. Beta 1.20 .89 Expected Return .130 .103 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,...
Suppose you observe the following situation: Security Pete Beta 1.25 Expected Return .1323 Corp. Repete Co. .87 .0967 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b.What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)...
CAPM Question
Problem 1 (15pts). Given the following data: Security Beta Expected Return 1.3 20% 0.8 14% 18% 1.2 (a) (10pts). Assume Securities 1 and 2 are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (b) (5pts). Would you recommend buying Security 3 according to CAPM? Why or why not?
Most questions answered within 3 hours.
-
Describe what “scope creep” is and how can it be avoided? Who is
typically the person...
asked 27 seconds ago -
Any permanent decrease in autonomous real spending will cause
even larger decreases in real GDP per...
asked 50 seconds ago -
A large distributor has 8 retail outlets. Currently each outlet
manages its ordering independently. Demand at...
asked 12 minutes ago -
You have purchased a $1,000,000 million Face or Par Value 5-year
T-note. This 5-year T-note pays...
asked 9 minutes ago -
Two objects repel/attract each other. What can one say about their
charges?
asked 9 minutes ago -
explain using physics theory either one
Why should you not put foil in the microwave? or...
asked 11 minutes ago -
9 A website that facilitates transactions by bringing together
buyers and sellers from all over the...
asked 13 minutes ago -
Write a command line to view the long listing of all files,
including hidden files, with...
asked 46 minutes ago -
What kind of experiment would allow you to test that the
posterior cytoplasm can cause the...
asked 26 minutes ago -
Code in C++ please!
Write a function that takes an array of integers as an input...
asked 27 minutes ago -
Predict the reactions, if any, when the
following hydrogen compounds are added to water, and
explain...
asked 47 minutes ago -
What is the expression for the uncertainty in the total energy
Etot of equation?
Assume an...
asked 49 minutes ago