ZuoTi.Pro
Question

the risk fee rate on a treasury bill is 2%. the annual rate on return on...

the risk fee rate on a treasury bill is 2%. the annual rate on return on the dow jones market index is 7%. you are considering a stock with a beta that is 30% more volatine than the overall market beta. what is the minimum level of annual return that you would require on this investment?
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Expected return = Risk free rate + Beta*(Market risk-Risk free rate)

= 2%+ 1*130%*(7%-2%)

=2%+ 1.3*5%

= 8.5%

0 0
Add a comment
Know the answer?
Add Answer to:
the risk fee rate on a treasury bill is 2%. the annual rate on return on...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

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

  • The risk free rate on Treasury bill is 2%. The annual rate of return onn the...

    The risk free rate on Treasury bill is 2%. The annual rate of return onn the DowJones market index is 7%. You are considering a stock with a beta that is 30% more volatile than the overall market beta. What is the minimum level of annual return that you would require on this investment? Choose one of the following A) 5.5% B) 2% C) 8.5% D) 6.5% E) 5%

  • . The Treasury bill rate (i.e. risk-free rate) is 2.5%, and the expected return on the...

    . The Treasury bill rate (i.e. risk-free rate) is 2.5%, and the expected return on the market portfolio is 12%. Using the capital asset pricing model: a. What is the risk premium on the market? b. What is the required rate of return on an investment with a beta of 1.15? c. If an investment with a beta of 0.80 offers an expected return of 10.5%, does it have a positive NPV?

  • The Treasury bill rate is 4%, and the expected return on the market portfolio is 11%....

    The Treasury bill rate is 4%, and the expected return on the market portfolio is 11%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.6? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.8 offers an expected return of 8.6%, does it have...

  • The Treasury bill rate is 4%, and the expected return on the market portfolio is 11%....

    The Treasury bill rate is 4%, and the expected return on the market portfolio is 11%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.6? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.8 offers an expected return of 8.6%, does it have...

  • The Treasury bill rate is 4%, and the expected return on the market portfolio is 14%....

    The Treasury bill rate is 4%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.7 offers an expected return of 9.0%, does it have...

  • The current 3-month Treasury Bill rate is 3%. If the expected market return is 7% and...

    The current 3-month Treasury Bill rate is 3%. If the expected market return is 7% and a company's stock has a beta of 1.3, what is the expected return for that company's stock? Group of answer choices 8.03% 7.75% 8.20%

  • Select a company from the Dow Jones Industrials Index and prepare a risk analysis. You risk...

    Select a company from the Dow Jones Industrials Index and prepare a risk analysis. You risk analysis should include minimally below: Credit rating Beta value CAPM required return on equity investment CAPM rates to use: Risk Free Interest Rate = 1.81% Market Risk Return = 9.00%

  • Suppose that the Treasury bill rate is 4% and the expected return on the market stays...

    Suppose that the Treasury bill rate is 4% and the expected return on the market stays at 9%. Use the following information. Stock Beta (β) Caterpillar 1.68 Dow Chemical 1.63 Ford 1.42 Microsoft 0.96 Apple 0.93 Johnson & Johnson 0.55 Walmart 0.47 Campbell Soup 0.37 Consolidated Edison 0.19 Newmont 0.00 a. Calculate the expected return from Johnson & Johnson. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected return             % b. Find...

  • 6.8.0 The Treasury bill rate is 2% and the market risk premium is 8%. Project Internal...

    6.8.0 The Treasury bill rate is 2% and the market risk premium is 8%. Project Internal Rate of Return, % 12 UOME Beta 1.00 0.00 3.00 0.40 2.60 a. What are the project costs of capital for new ventures with betas of 0.70 and 1.12? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Beta Cost of Capital 0.7 1.12 b. Which of the capital investments shown above have positive (non-zero) NPV's? (You...

  • doud 22. Excess return portfolio performance measures Adjust portfolio risk to match benchmark risk. Compare portfolio...

    doud 22. Excess return portfolio performance measures Adjust portfolio risk to match benchmark risk. Compare portfolio returns to expected returns under CAPM. Evaluate portfolio performance on the basis of return per unit of risk. Indicate historic average differential return per unit of historic variability of differential return. None of the above. 23 An example of a market cap weighted stock market indicator series is the a. Dow Jones Industrial Average. b. Nikkei Dow Jones Average. c. S&P 500 Index. d....

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