11. risk free rate =3.5%
Expected Return of stock =10.4%
Expected Market return =13%
Beta Coefficient =(Expected Return of stock -Risk Free
rate)/(Market Return -Risk Free rate) =(10.4%-3.5%)/(13%-3.5%)
=0.73
13. Required Rate =15%
Risk Free rate =3%
Beta =1.2
Market risk Premium =(Required Rate-Risk Free Rate)/Beta
=(15%-3%)/1.2 =10%
Risk Free Rate of Return will remain same at 3%
Asset beta would Remain same at 1.2
The Required Rate =Risk Free rate+Beta*New Market risk Premium
=3%+1.2*12% =17.4%
#11 and #13 (CAPM) The stock is appropriately priced and its expected annual return is 10.4%....
please show all work 5. SML A stock is appropriately priced at $40 per share. At this price, the required return is 15% and 15 beta coefficient is 1.2. At this same point in time, the return on the 20-year Treasury is expected to be 3. What is the market risk premium? What should happen to the risk-free rate of return, asset pela coefficient, and required retum on the stock if the market risk premium increases to 12% from an...
According to the CAPM, what must be the beta of a portfolio with expected return 0.25, if the risk-free rate is 0.07 and the market risk premium is 0.12? Assume that the stock is fairly priced according to the CAPM.
(CAPM) The risk free rate of return is 3% and the stock's beta coefficient is 1.2. If the market risk premium is 8.2%.,what is the required return of stock?
13. Using CAPM (LO1, 4) A stock has a beta of 1.15, the expected return on the market is 10.3 percent, and the risk-free rate is 3.8 percent. What must the expected return on this stock be?
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...
Problem 1 2pts] According to the CAPM, what is the expected return of the stock with the standard deviation of the returns of 40% and the correlation between its returns and the market returns is -0.12 The market's expected return and standard deviation are 6% and 15%, respectively. The risk-free rate is 30 Problem 2 The risk-free rate is 1% and the market risk premium is 6%. Below table slows the ru characteristics of three stocks A, B, and C:...
You are analyzing two assets: collectible LEGO sets, and stock of Apple. In the last 5 years, LEGOs have had an annual volatility of 5%, annual return of 6%, and a CAPM beta (the correlation coefficient between the asset and the market risk-premium) of 1.6. Apple has had an annual volatility of 10%, an annual return of 8%, and a CAPM beta of 1.2. 1) If the risk-premium of the market is currently 7% and the risk-free rate is 2%,...
Stock A has a beta of 1.20 and is farily priced. The riskless rate of return (US Treasury Bills) is 3.2%. The market risk premium is 5.4%. Construct a $100,000 portfolio of stock A and Treasury Bills that will have an expected return of 5.144%. (Rounded to the nearest dollar.)
Chapter 07 Practice Test Question 10 Working With the CAPM You believe that a stock is fairly priced according to the CAPM. The stock has a beta of 2.8 when the market risk premium is 5.1% and the risk free rate is 2.6%. If the stock's dividend yield is 3.9% what is the stock's expected capital gain yield? points Skipped Multiple Choice eBook 0 Print 0 References 0 12.98% 0
these SUCI 8-19 KAND RETURN Stock X has a 10% expected return, a beta coefficient of EVALUATING 0.9. and a 35% 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%. a. Calculate each stock's coefficient of variation. b. Which stock is riskier for a diversified investor? c. Calculate each stock's required rate of return. d....