Homework Answers
Required return=risk free rate+beta*(market rate-risk free rate)
=5.5+2*(12-5.5)
which is equal to
=18.5%
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8-4 on the market is 12%. What is the required rate of return on a stock with a beta of 2? EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 3.5% and the market risk premium is 4%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 0.8? BETA AND REQUIRED RATE OF RETURN A stock has a roauired return of 007...
Check My Work (2 remaining) 8-3: Risk in a Portfolio Context: The CAPM 8-4: The Relationship...
Check My Work (2 remaining) 8-3: Risk in a Portfolio Context: The CAPM 8-4: The Relationship Between Risk and Rates of Return CAPM and portfolio return You have been managing a $5 million portfolio that has a beta of 1.70 and a required rate of return of 14%. The current risk-free rate is 3.00%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.85, what will be the required return on...
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please answer all parts 1)Assume that the risk-free rate is 5.5% and the required return on the market is 8%. What is t...
please answer all parts 1)Assume that the risk-free rate is 5.5% and the required return on the market is 8%. What is the required rate of return on a stock with a beta of 3? Round your answer to two decimal places. _____% 2)Assume that the risk-free rate is 3.5% and the market risk premium is 5%. What is the required return for the overall stock market? Round your answer to one decimal place. ______% 3)What is the required rate...
Tom O'Brien has a 2-stock portfolio with a total value of $100,000 $47.500 is invested in Stock A with a beta...
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2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk and Rates of Return:...
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk
and Rates of Return: Risk in Portfolio Context The capital asset
pricing model (CAPM) explains how risk should be considered when
stocks and other assets are held . The CAPM states that any stock's
required rate of return is the risk-free rate of return plus a risk
premium that reflects only the risk remaining diversification. Most
individuals hold stocks in portfolios. The risk of a stock held in...
1) A)An individual has $35,000 invested in a stock with a beta of 0.3 and another...
1) A)An individual has $35,000 invested in a stock with a beta of 0.3 and another $40,000 invested in a stock with a beta of 2.4. If these are the only two investments in her portfolio, what is her portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places. b)Assume that the risk-free rate is 2.5% and the required return on the market is 9%. What is the required rate of return on a stock with...
EXPECTED RETURN A stock's returns have the following distribution: Demand for the Company's Products Probability of this Demand Occurring Rate of Return if this Demand Occurs 07 (30%) (14) Weak Below average Average Above average Strong Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. LULens and the required return m 8-3 another $75,000 invested in a stock with duetu u in her portfolio, what is her portfolio's beta? REQUIRED...
8-4 on the market is 12%. What is the required rate of return on a stock with a beta of 2? EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 3.5% and the market risk premium is 4%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 0.8? BETA AND REQUIRED RATE OF RETURN A stock has a roauired return of 007...
Check My Work (2 remaining) 8-3: Risk in a Portfolio Context: The CAPM 8-4: The Relationship Between Risk and Rates of Return CAPM and portfolio return You have been managing a $5 million portfolio that has a beta of 1.70 and a required rate of return of 14%. The current risk-free rate is 3.00%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.85, what will be the required return on...
Problem 3: Calculating a portfolio's beta and CAPM-based expected rate of return Ashley is curious to know what her portfolio's CAPM-based expected rate of return should be. After doing some research, she determines that the current market values and betas of each of her 5 stock are as listed below. She is informed by her financial advisor that the risk-free rate is 3% and the market risk premium is 8%. Calculate the expected rate of return on Ashley's portfolio. Stock...
Tom O'Brien has a 2-stock portfolio with a total value of $100,000 $47.500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio's beta? Do not round your intermediate calculations. Round your final answer to 2 decimal places. a. 1.06 O b. 1.05 . c. 1.09 • O d. 1.10 OOO oooo.. o. Click here to read the eBook: The Relationship Between Risk...
8. Portfolio risk and return Elle holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following table: Standard Deviation 9.00% Stock Omni Consumer Products Co. (OCP) Zaxatti Enterprises (ZE) Three Waters Co. (TWC) Mainway Toys Co. (MTC) Investment $1,750 $1,000 $750 $1,500 Beta 0.80 1.90 1.15 0.30 11.50% 16.00% 28.50% Suppose all stocks in Elle's portfolio were equally weighted. Which of these stocks would contribute...
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk
and Rates of Return: Risk in Portfolio Context The capital asset
pricing model (CAPM) explains how risk should be considered when
stocks and other assets are held . The CAPM states that any stock's
required rate of return is the risk-free rate of return plus a risk
premium that reflects only the risk remaining diversification. Most
individuals hold stocks in portfolios. The risk of a stock held in...
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