Suppose the risk free rate is 4.8% and the expected rate of return to the market...

Question

Question

Answer 1

Answer #1

Expected return = Risk-free rate + Beta(Market return - Risk-free rate)

Expected return = 0.048 + 0.7(0.10 - 0.048)

Expected return = 0.0844 or 8.44%

Answer 2

Similar Homework Help Questions

1. You are analyzing a common stock with a beta of 1.5. The risk-free rate of...

1. You are analyzing a common stock with a beta of 1.5. The risk-free rate of interest is 5 percent and the expected return on the market is 15 percent. If the stock's return based on its market price is 21.5%, the stock is overvalued since the expected return is above the SML. the stock is undervalued since the expected return is above the SML. the stock is correctly valued since the expected return is above the SML. the stock...
If the market risk premium is 12.4 percent and the risk-free rate is 4.8, what is...

If the market risk premium is 12.4 percent and the risk-free rate is 4.8, what is the expected rate of return for a stock with a beta of 1.08 under the Capital Asset Pricing Model (CAPM)? (show your answer in decimal form to four places)
TOISRULIUSS. Expected Return = Risk free Rate + beta (expected market return - risk free rate)...

TOISRULIUSS. Expected Return = Risk free Rate + beta (expected market return - risk free rate) .04 +0.80.09 - .04) = .08 = 8.0% 3. Suppose the MiniCD Corporation's common stock has a return of 12%. Assume the risk- free rate is 4%, the expected market return is 9%, and no unsystematic influence affected Mini's return. The beta for MiniCD is:

Problem 7.12 Assume the expected return on the market is 13 percent and the risk-free rate...

Problem 7.12 Assume the expected return on the market is 13 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 0.50? (Enter your answers in decimals. Do not enter percent values.) Expected return What is the market risk premium? (Enter your answers in decimals. Do not enter percent values.) Market risk premium
Suppose that the average excess return on stocks is 12.00% and that the risk-free interest rate...

Suppose that the average excess return on stocks is 12.00% and that the risk-free interest rate is 3.00%. Compute expected returns to stocks with each of the following beta coefficients using the capital asset pricing model (CAPM): Hint: Do not forget to enter the minus sign if the value of the return to stock is negative.) Return to Stocks (%) 0.7 0.2 1.0 2.0 Based on the CAPM and your calculations for the return to stocks, what does it mean...
Risk-free rate is 4%. The expected market return is 12%. Suppose beta = 1.2. What is...

Risk-free rate is 4%. The expected market return is 12%. Suppose beta = 1.2. What is the expected return of the stock?

A stock has a beta of 0.7. Suppose the expected market return is 8% and the...

A stock has a beta of 0.7. Suppose the expected market return is 8% and the risk-free rate is 2%. What is this stock's expected return according to the CAPM? Answer in percent, rounded to one decimal place.
eBook Problem 11-06 The risk-free rate of return is 1 percent, and the expected return on...

eBook Problem 11-06 The risk-free rate of return is 1 percent, and the expected return on the market is 7.1 percent. Stock A has a beta coefficient of 1.4, an earnings and dividend growth rate of 6 percent, and a current dividend of $3.50 a share. Do not round intermediate calculations. Round your answers to the nearest cent. .. What should be the market price of the stock? $ b. If the current market price of the stock is $119.00,...
Looking at market data, you find out that the current risk-free rate is 3.9%, the expected...

Looking at market data, you find out that the current risk-free rate is 3.9%, the expected return of the market index is 6.9%. Company XYZ's beta is 1.7. If the price of XYZ's stock is in equilibrium, what should be its required rate of return?

A stock has a beta of 0.7. Suppose the expected market return is 8% and the...

A stock has a beta of 0.7. Suppose the expected market return is 8% and the risk-free rate is 2%. What is this stock's expected return according to the CAPM? Answer in percent, rounded to one decimal place. (e.g., 8.32% = 8.3)