1.
=3%+1.2*5%=9.00%
2.
=3%+1%+1.2*5%=10.00%
3.
=3%+1.2*(5%+2%)=11.40%
4.
=3%+1%+1.2*(5%+2%)=12.40%
5.
=0.15*19%+0.45*10%+0.40*(-6%)
=4.95%
6.
=sqrt(0.15*(19%-4.95%)^2+0.45*(10%-4.95%)^2+0.40*(-6%-4.95%)^2)
=9.44%
7.
=9.44%/4.95%
=1.90707
Quantitative Problem: You are given the following information for Wine and Cork Enterprises (WCE): PRF =...
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Quantitative Problem: You are given the following information for Wine and Cork Enterprises (WCE): rRF = 2%; rM = 10%; RPM = 8%, and beta = 1 What is WCE's required rate of return? Round your answer to 2 decimal places. Do not round intermediate calculations. % If inflation increases by 3% but there is no change in investors' risk aversion, what is WCE's required rate of return now? Round your answer to two decimal places. Do not round intermediate...
You are given the following information for Wine and Cork Enterprises (WCE): rRF = 5%; rM = 9%; RPM = 4%, and beta = 1 1.What is WCE's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. 2. If inflation increases by 1% but there is no change in investors' risk aversion, what is WCE's required rate of return now? Do not round intermediate calculations. Round your answer to two decimal places. 3.Assume...
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Required return on Stock = Risk-free return + (Market risk premium)(Stock's beta) to compensate the investor for risk. If a stock's expected return plots below the SM If a stock's expected return plots on or above the SML, then the stock's return is -Select- the stock's return is -Select- to compensate the investor for risk. The SML line can change due to expected inflation and risk aversion. If inflation changes, then the SML plotted on a graph will shift up...
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The security market line (SML) is an equation that shows the relationship between risk as measured by beta and the required rates of return on individual securities. The SML equation is given below: If a stock's expected return plots on or above the SML, then the stock's return is -Select-insufficientsufficientCorrect 1 of Item 1 to compensate the investor for risk. If a stock's expected return plots below the SML, the stock's return is -Select-insufficientsufficientCorrect 2 of Item 1 to...
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