If the risk-free rate is 2% and the MRP is 7%, according to CAPM, a stock...
If the risk-free rate is 2% and the MRP is 7%, according to CAPM, a stock that is three-quarters as risky as the market would have an expected return of 7.25% . I don't understand what I am doing with my math, I solved it as .02+.75 * .07. My answer was .0539 not 7.25%. Can you break down the math please?
Homework Answers
Answer:
Risk free Rate Rf=2%
MRP=7%
number of years =0.75 years
So Expected return =2%+0.75*7%=7.25%
Add Answer to:
If the risk-free rate is 2% and the MRP is 7%, according to
CAPM, a stock...
Sheridan Industries common stock has a beta of 1.2. If the market risk-free rate is 5.2...
Sheridan Industries common stock has a beta of 1.2. If the
market risk-free rate is 5.2 percent and the expected return on the
market is 8.2 percent, what is Sheridan’s cost of common stock?
I solved this problem incorrectly by doing
Kes=Rrf+(Betaesx market risk
premium)
Kes=0.052+(1.2x0.082)
Kes=0.052+0.098400
Kes=0.1504=15.0%
I'm not sure what I am doing wrong. Please show full
calculation.
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Sheridan Industries common stock has a beta of 1.2. If the
market risk-free rate is 5.2 percent and the expected return on the
market is 8.2 percent, what is Sheridan’s cost of common stock?
I solved this problem incorrectly by doing
Kes=Rrf+(Betaesx market risk
premium)
Kes=0.052+(1.2x0.082)
Kes=0.052+0.098400
Kes=0.1504=15.0%
I'm not sure what I am doing wrong. Please show full
calculation.
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