Suppose that currently the risk free rate of interest, Rf, is 2%, the expected rate of return on the market portfolio, Rm, is 9% and beta of the common stock of Northern Mines Ltd. is 2.5. Calculate the current cost of equity capital, denoted by ke, to Northern Mines Ltd.
Suppose that currently the risk free rate of interest, Rf, is 2%, the expected rate of...
Suppose that CAPM holds. Let Rf denote the risk free rate, E(RM) the expected return of the market portfolio, and sigmaMthe standard deviation of the market portfolio. Now consider some portfolio on the capital market line, with expected return E(R) and standard deviation sigma. What is the beta of this portfolio? Select one: 1. E(R)/sigma 2. sigmaM/sigma 3. sigma/sigmaM 4. E(RM)-Rf
Assume a risk-free rate of interest of 4%, an expected rate of return on the market portfolio of 9% and a beta of 1.2 then the traditional domestic CAPM results in a cost of equity of
Suppose that the risk-free interest rate is 4% per year, and the expected return on the market portfolio is 10% per year. The standard deviation of the return on the market portfolio is 24% per year. A consumer products company, ACC Corp, has a standard deviation of return of 45% per year, and a correlation with the market of 0.28 a) What is ACC’s beta? b) If the CAPM holds, what is ACC’s required rate of return on equity?
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:
A stock has an expected return of 13.2 percent, the risk-free rate is 6 percent, and the market risk premium is 10 percent. What must the beta of this stock be? (Do not round intermediate calculations. Round your answer to minimum 2 decimal places, e.g., 32.16.) ______ Hint: Solve for beta from the formula ER = RF + BETA x (RM - RF) where MRP=RM-RF
The risk-free rate is 4.5%, the market risk premium = ( E(Rm) - Rf) is 10.1%, and the stock’s beta is 1.3. What is the required rate of return on the stock, E(Ri)? Use the CAPM equation.
Suppose that the risk-free rate is Rf = 2.70% and the risk-premium is E(Rm) - Rf = 7.23%. According to Gordon's Growth Model, if a company has a current dividend of DO = $24.40 per share, a constant growth rate of g = 5.62%, and B = 1.26, what is its stock price?
Suppose that the risk-free rate is Rf = 2.53% and the risk-premium is E(Rm) − Rf = 7.10%. According to Gordon’s Growth Model, if a company has a current dividend of D0 = $22.33 per share, a constant growth rate of g = 5.24%, and β = 1.21, what is its stock price?
Suppose that the expected return of a stock is 12%, the risk-free rate is 1%, the expected return of the market portfolio is 7%, and the beta of the stock with respect to the market portfolio is 1.0. What is the difference between the expected return of the stock and expected return that results from the CAPM for such stock (i.e. expected return - expected return from CAPM)? 3.80% 4.40% 5.00% 5.60%
Now assume a risk-free rate of interest of 4% an expected rate of return on the global market portfolio of 8% and a global beta of 0.90 then the ICAPM results in a cost of equity of