a. Using the CAPM, the fair rate of return for Intel common stock is:
= Risk free rate + Beta(Expected market return - Risk free rate)
= 8% + 1.2(12% - 8%)
= 12.80%
b. The computed 12.80% is a fair rate because it compensates the investor for the time value of money and for assuming risk.
Pearson MyLab & Mastering - 19 F Basic Financial Fin 301-01 (Fall 2019) Homework: Chapter 6...
a. Compute the expected rate of return for Intel common stock,
which has a 1.4 beta. The risk-free rate is 3
percent and the market portfolio (composed of New York Stock
Exchange stocks) has an expected return of 12 percent.
b. Why is the rate you computed the expected rate?
P8-13 (similar to) Question Help (Expected rate of return using CAPM) a. Compute the expected rate of return for Intel common stock, which has a 1.4 beta. The risk-free rate...
(Expected rate of return using CAPM) a. Compute the expected rate of return for Intel common stock, which has a 1.5 beta. The risk-free rate is 4 percent and the market portfolio (composed of New York Stock Exchange stocks) has an expected return of 15 percent. b. Why is the rate you computed the expected rate? a. The expected rate of return for Intel common stock isl%. (Round to one decimal place.)
a. Compute a fair rate of return for Intel common stock, which has a 1.6 beta. The risk-free rate is 6 percent, and the market portfolio (New York Stock Exchange stocks) has an expected return of 12 percent. b. Why is the rate you computed a fair rate?