Homework Answers
Ans) CAPM
CAPM i,e The capital asset pricing model describes relationship between systemetic risk and expected return of the assets
CAPM = Risk free rate of return + Beta(Market risk premium)
Beta is measure of risk and hence if beta is more return will be more and if beta is less than return will be less. Thus defining relationship between risk and reward
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Question 6 (5 points) defines the relationship between risk and return. The O market risk premium....
A preferred stock pays a dividend of $1.00 every 6 months. What is the required return...
A preferred stock pays a dividend of $1.00 every 6 months. What is the required return (annually) if the stock is currently trading at $20? 20% 5% 10% 16% 025% Question 14 (5 points) ✓ Saved The defines the relationship between risk and return. market risk premium. CAPM. volatility. theory of diversification. Peace Music issued bonds eight years ago that now have 17 years to maturity, face value of $1,000, YTM of 8%, and an annual coupon rate of 10%....
Your estimate of the market risk premium is 5%. The risk-free rate of return is 4%,...
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Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk premium is 0.07, and the market risk premium has a standard deviation of 25%, then what is asset B's expected return under the CAPM?
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According to the CAPM, what is the market risk premium given an expected return on a security of 9.8%, a stock beta of 1.2, and a risk-free interest rate of 5%? o 6.00% o 6.60% o 5.00% o 4.00%
Your estimate of the market risk premium is 9%. The risk-free rate of return is 3.6%...
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Click here to read the eBook: The Relationship Between Risk and Rates of Return BETA AND...
Click here to read the eBook: The Relationship Between Risk and Rates of Return BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%; the risk-free rate is 5.5%; and the market risk premium is 4%. a. What is the stock's beta? Round your answer to two decimal places. premium b. If the market risk premium increased to 9%, what would happen to the stock's required rate of retum? Assume that the risk-free rate and the...
The risk-free rate of return is 5 percent and the market risk premium is 9 percent....
The risk-free rate of return is 5 percent and the market risk premium is 9 percent. What is the expected rate of return on a stock with a beta of 1.16? O 15.44 O 10.80 10.44 O 16.24 O 15.80
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You are analyzing two assets: collectible LEGO sets, and stock of Apple. In the last 5...
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A preferred stock pays a dividend of $1.00 every 6 months. What is the required return (annually) if the stock is currently trading at $20? 20% 5% 10% 16% 025% Question 14 (5 points) ✓ Saved The defines the relationship between risk and return. market risk premium. CAPM. volatility. theory of diversification. Peace Music issued bonds eight years ago that now have 17 years to maturity, face value of $1,000, YTM of 8%, and an annual coupon rate of 10%....
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Your estimate of the market risk premium is 7%. The risk-free rate of return is 5%, and General Motors has a beta of 1.5. According to the Capital Asset Pricing Model (CAPM), what is its expected return? O A. 14.7% OB. 11.6% O C. 15.5% OD. 13.2%
Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk premium is 0.07, and the market risk premium has a standard deviation of 25%, then what is asset B's expected return under the CAPM?
Asset A has a CAPM beta of 1.5. The covariance between asset A and asset B is 0.13. If the risk-free rate is 0.05, the expected market risk...
According to the CAPM, what is the market risk premium given an expected return on a security of 9.8%, a stock beta of 1.2, and a risk-free interest rate of 5%? o 6.00% o 6.60% o 5.00% o 4.00%
Your estimate of the market risk premium is 9%. The risk-free rate of return is 3.6% and General Motors has a beta of 1.1. According to the Capital Asset Pricing Model (CAPM), what is its expected return? O A. 14.2% O B. 12.2% O C. 12.8% OD. 13.5%
Click here to read the eBook: The Relationship Between Risk and Rates of Return BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%; the risk-free rate is 5.5%; and the market risk premium is 4%. a. What is the stock's beta? Round your answer to two decimal places. premium b. If the market risk premium increased to 9%, what would happen to the stock's required rate of retum? Assume that the risk-free rate and the...
The risk-free rate of return is 5 percent and the market risk premium is 9 percent. What is the expected rate of return on a stock with a beta of 1.16? O 15.44 O 10.80 10.44 O 16.24 O 15.80
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