Expected return for Stock XYZ=risk free rate+market factor*excess market return+size factor*excess of small over large+bookmarket factor*excess of high over low=4%+1.2*5%+0.7*3%+0.9*4%
=15.70%
Can i get it solved step by step please (not excel) 3. Suppose the risk-free rate...
Suppose the risk-free interest rate is 3% and the market risk premium is 7%. A Company, XYZ, has a beta 1.2. The Dividend per share of $1.1 was paid at the end of the year to investors. The Dividend growth is 6% per year in the next two years and 5% per year for all years after that. (a) What is the expected return of XYZ stock as per CAPM? (b) What is the expected price of XYZ stock in...
step by step solutions please. no excel solutions
2. Using the CAPM, answer the following problems: a. A stock has a beta of 1.2, the expected return on the market is 17 percent, and the risk-free rate is 8 percent. What must the expected return on this stock be? b. A stock has an expected return of 14 percent, the risk-free rate is 4 percent, and the market risk premium is 6 percent. What must the beta of this stock...
Suppose that the risk-free rate is 3% and that the market risk premium is 8%. What is the required return on the market? Round your answer to two decimal places. % What is the required return on a stock with a beta of 1.2? Round your answer to two decimal places. % What is the required return on a stock with a beta of 0.4? Round your answer to two decimal places.
Suppose the risk-free is 4%. If you have a stock with ? of 0.7 and the risk premium on the market is 5%, what must be the expected return of the stock assuming that the market is the only factor. Illustrate your answer graphically.
A. The risk-free rate is 2.05% and the market risk premium is 6.07%. A stock with a β of 1.23 will have an expected return of ____%. B. The risk-free rate is 2.66% and the expected return on the market 7.48%. A stock with a β of 1.00 will have an expected return of ____%. C. A stock has an expected return of 17.00%. The risk-free rate is 1.18% and the market risk premium is 6.12%. What is the β...
Given the following information about Stock XYZ what is the expected return for Stock XYZ given the CAPM? The risk-free rate is 1.1%, the market risk premium is 10.8%, and the Beta of Stock XYZ is 1.2.
Risk-free rate is 4%. The expected market return is 12%. Suppose beta = 1.2. What is the expected return of the stock?
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.
X Your answer is incorrect. Sheridan Industries common stock has a beta of 1.2. If the market risk-free rate is...
Problem 3 The risk-free rate is 2%, the market risk premium is 5%, and the size factor and value factor return are 2% and 3%. Below table shows the return characteristics of two stocks A and B: Stock Forecasted return (FR) BMKT BSMB BHML 9.60% 0.9 0.8 -0.5 4.80% 0.8 -0.2 0.4 a. [2pts) According to the Fama-French 3-factor model, what would be the fair return for each stock? b. 2pts Characterize each stock as underpriced, overpriced, or properly priced.
Consider the following simplified APT model: Factor Expected Risk Premium (%) Market 8.2 Interest rate −.4 Yield spread 5.3 Factor Risk Exposures Market Interest Rate Yield Spread Stock (b1) (b2) (b3) P 1.8 –1.3 –.6 P2 1.2 0 .9 P3 .3 .9 1.0 Consider a portfolio with equal investments in stocks P, P2, and P3. Assume rf = 3%. a. What are the factor risk exposures for the portfolio? (A negative answer should be indicated by a minus sign. Do...