ZuoTi.Pro
Question

The relation between the required rate of return and beta is called the a. security market...

The relation between the required rate of return and beta is called the
a. security market line.
b. capital market line.
c. characteristic line.
d. systematic risk.
e. unsystematic risk


business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

The relation between the required rate of return and beta is called the

a. security market line

SML is he equation of CAPM. Its purpose is to price ths security. Beta is the relevant measure of risk in SML. SML gives the relation between the required rate of return and beta.

0 0
Add a comment
Know the answer?
Add Answer to:
The relation between the required rate of return and beta is called the a. security market...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • The intercept point of the security market line is the rate of return which corresponds to:...

    The intercept point of the security market line is the rate of return which corresponds to: Group of answer choices a. a value of 0. b. the risk-free rate of return. c. a value of 1. d. the beta of the market. e. the market rate of return.

  • Find the required rate of return for Security X if its beta is 1.80, if the...

    Find the required rate of return for Security X if its beta is 1.80, if the risk-free rate is .02, and the market return is .09. Find the expected return if the degree of risk aversion decreases by 1.5 percentage points. How did Security X's return change? Why? How much did the market portfolios' return change? How much did Security Y's return change if that Security Y had a beta of 0.5?

  • Assume the market rate of return is 10.1 percent and the risk-free rate of return is...

    Assume the market rate of return is 10.1 percent and the risk-free rate of return is 3.2 percent. Lexant stock has 2 percent less systematic risk than the market and has an actual return of 10.2 percent. This stock: A. is underpriced. B. is correctly priced. C. will plot below the security market line. D. will plot on the security market line. E. will plot to the right of the overall market on a security market line graph.

  • The risk free rate is 4%, and the required return on the market is 12%. a)...

    The risk free rate is 4%, and the required return on the market is 12%. a) What is the required return on an asset with a beta of 1.5? b) What is the reward/risk ratio given the required rate of return from (a)? c) What is the required return on a portfolio consisting of 40% of the asset above and the rest in an asset with an average amount of systematic risk? (hint: asset with an average amount of systematic...

  • Security X has an expected rate of return of 21% and a beta of 1.85. The...

    Security X has an expected rate of return of 21% and a beta of 1.85. The risk-free rate is 3%, and the market expected rate of return is 12%. According to the capital asset pricing model, security X is _________. A. overpriced B. none of these answers C. underpriced D. fairly priced

  • Security X has a rate of return of 13% and a beta of 1.15. The risk-free...

    Security X has a rate of return of 13% and a beta of 1.15. The risk-free rate is 5% and the market expected rate of return is 10%. According to the capital asset pricing model, security X is 1) fairly priced 2) underpriced 3) overpriced 4) None of the answers are correct Security X has a rate of return of 13% and a beta of 1.15. The risk-free rate is 5% and the market expected rate of return is 10%....

  • Security ABC has a price of $35 and a beta of 1.5. The risk-free rate is...

    Security ABC has a price of $35 and a beta of 1.5. The risk-free rate is 5% and the market risk premium is 6%. a)Explain the terms beta and market risk premium. b)What is the market portfolio? c)According to the CAPM, what return do investors expect on the security? d)Investors expect the security not to pay any dividend next year. e)At what price do investors expect the security to trade next year? f)At what price do investors expect the security...

  • E A B The market price of a security is $40. Its expected rate of return...

    E A B The market price of a security is $40. Its expected rate of return is 13%. The risk-free rate is 7%, and the market risk premium is 8% . What will the market price of the security be if its beta doubles (and all other variables remain unchanged)? Assume the stock is expected to pay a constant dividend in perpetuity. Market price of security Security expected rate of return Risk free rate of return Market risk premium Change...

  • 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:

  • Use the security market line to determine the required rate of return for the following​ firm's...

    Use the security market line to determine the required rate of return for the following​ firm's stock. The firm has a beta of​ 1.20, the required return in the market place is​ 10.00%, and the riskminus−free rate of return is​ 1.50%.

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT