Question

please answer all parts

1)Assume that the risk-free rate is 5.5% and the required return on the market is 8%. What is the required rate of return on a stock with a beta of 3? Round your answer to two decimal places.

_____%

2)Assume that the risk-free rate is 3.5% and the market risk premium is 5%. What is the required return for the overall stock market? Round your answer to one decimal place.

______%

3)What is the required rate of return on a stock with a beta of 1.3? Round your answer to one decimal place.

_______%

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Add-Ins View - 2x Dr Wrap Text General st Fat Merge Center $ % , .0 .00 Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles File Home Insert Page Layout Formulas Data Review % Cut Calibri -11AA = = = Ea Copy Paste BI U DA E = 5 Format Painter Clipboard Font C A72 А B C D E 56 Find & Select Σ AutoSum : A Fill Z Sort & Clear Filter Editing Alignment Number Cells F G H I J K L M N O P 57 58 Required rate of return = Rf + beta (Rm-Rf) Required rate of return = 5.5% + 3(8%-5.5%) Required rate of return = 13.00% Rf = risk free rate = 5.5% Rm = market rate of return = 8% Rm- Rf = market risk premium = 5% beta of overall market = 1 Required rate of return = Rf + beta (Rm-Rf) Required rate of return = 3.5% + 1(5%) Required rate of return = 8.5% 59 60 1) 61 62 63 64 65 2) 66 67 68 69 3) 70 71 72 73 Required rate of return = Rf + beta (Rm-Rf) Required rate of return = 5.5% + 1.3(5%) Required rate of return = 12.0% [note : I have taken data of Q.2 to solve the Q.3] (Any change, let me know] 74 75 76 HIN ETEMADI 513 Sheet2 DOUBLE Sheet4 Sheets Sheets 57 58 59 ORGANIC PRODUCE WACC S10 S11 S1 S3 SPECIFIC ► NAME DIV YIELD ferences Sheet1 BOH 120% Real A ll → 29-10-2019