Mack Motors has a beta of 1.1. Real risk free return is 2 % , expected...

Question

Question

Answer 1

Answer #1

Q - 6

Mack's required rate of return = real risk free return + inflation + Beta x market risk premium = 2% + 3% + 1.1 x 4.7% = 10.17%

Q - 7

Stock return = 11.75% = risk free rate + Beta x (Market return - risk free rate) = 4.3% + 1.23 x (Market return - 4.3%)

Hence, Market return = 4.3% + (11.75% - 4.3%) / 1.23 = 10.36%

Answer 2

Similar Homework Help Questions

5. Green corp's required rate of return is 12% and beta is 1.3. What is the...

5. Green corp's required rate of return is 12% and beta is 1.3. What is the required rate of return of Blue corp if its beta is.8 and market risk free return is 4.75%? 6. Mack Motors has a beta of 1.1. Real risk free return is 2%, expected inflation is 3%, and market risk premium if 4.7%. What is Mack's required rate of return? 7. Brook industries' stock return is 11.75% and beta is 1.23. What is the market...
1. Last year, Ahmed corp. issued 10-year 5% coupon bonds with face value of $500 each....

1. Last year, Ahmed corp. issued 10-year 5% coupon bonds with face value of $500 each. If then market rate for Ahmed's risk class was 6%, how much money did the firm raise from each bond? 2. Wheeler bought 1000 of these bonds last year. This year interests drops by 2%. If Wheeler decides to sell these bonds now, how much money will he make in capital gain (or loss)? 3. Profit corp. analysts estimated the following probability distributions for...
Stock A has a beta of 1.1 and an expected return of 10.2%, Stock B has...

Stock A has a beta of 1.1 and an expected return of 10.2%, Stock B has a beta of 1.4 and an expected return of 12.0%. If the risk-free rate is 3% and the market risk premium is 7%, which should you add to a portfolio with a beta of 0.8? a. Stock A b. Stock B c. Both d. Neither

HR Industries (HRI) has a beta of 1.7; LR Industries's (LRI) beta is 0.9. The risk-free...

HR Industries (HRI) has a beta of 1.7; LR Industries's (LRI) beta is 0.9. The risk-free rate is 6%, and the required rate of return on an average stock is 13%. The expected rate of inflation built into rRF falls by 1.5 percentage points, the real risk-free rate remains constant, the required return on the market falls to 10.5%, and all betas remain constant. After all of these changes, what will be the difference in the required returns for HRI...
Zelo stock has a beta of 1.23. The risk free rate of return is 2.86 percent...

Zelo stock has a beta of 1.23. The risk free rate of return is 2.86 percent and the market rate of return is 11.47 percent. What is the amount of the risk premium on Zelo stock?
Beta and required rate of return A stock has a required return of 16%; the risk-free...

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...

EVALUATING RISK AND RETURN Stock X has a 10% expected return, a beta coefficienta 0.9. and...

EVALUATING RISK AND RETURN Stock X has a 10% expected return, a beta coefficienta 0.9. and a 35.0 standard deviation of expected returns. Stock Y has a 12.5% expected return a beta coefficient of 1.2, and a 25% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. al Calculate each stock's coefficient of variation. Which stock is riskier for a diversified investor? Calculate each stock's required rate of return. d. On the basis of the...
EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 5% and the market...

EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 1.2?
The stock of United Industries has a beta a 2.26 and an expected return of 12.0. The risk-free rate of return is 4 perce...

The stock of United Industries has a beta a 2.26 and an expected return of 12.0. The risk-free rate of return is 4 percent. What is the expected return on the market? options: 7.66% 8.69% 8.24% 8.89% 7.54% The expected return on JK stock is 14.00 percent while the expected return on the market is 11.00 percent. The beta of JK stock is 1.5. What is the risk-free rate of return? options: 5.00 percent 3.90 percent 4.90 percent 4.31 percent...

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...