Assume the expected return on the market is 18 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 2.00? (Round answers to 2 decimal places, e.g. 0.25.) Expected return What is the market risk premium

Assume the expected return on the market is 18 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 2.00? (Round answers to 2 decimal places, e.g. 0.25.) Expected return What is the market risk premium

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

See similar textbooks

Related questions

Q: A stock has a required return of 12%, the risk-free rate is 2.5%, and the market risk premium is 5%.…

A: The Capital Asset Pricing Model (CAPM) is a model that describes the relationship between the…

Q: A stock has a required return of 10%, the risk-free rate is 6%, and the market risk premium is 3%.…

A: Formula: Required return=Risk free rate+Beta×Risk premium

Q: A stock has an expected return of 12.4%, the risk-free rate is 6.5%, and the market risk premium is…

A: In the given problem we require to calculate the Beta of the stock using following details: Expected…

Q: Assume that the risk-free rate is 5.5% and the market risk premium is 7%. What is the required…

A: In this we have to use capital assets pricing model to solve the problem.

Q: Assume rhat the risk-free rate is 5.5% and the market rate premium is 6%. A) What is the required…

A: As per CAPM, Required rate of return = Risk free Rate + (beta * Market Risk premium)

Q: Assume that the risk-free rate is 7.5% and the required return on the market is 11%. What is the…

A: Risk free rate = 7.5% Market return = 11% Beta = 2

Q: Assume that the risk-free rate is 6.00% and the market risk premium is 6.75%. What is the expected…

A: Given: Risk free rate=6% Market risk premium = 6.75%

Q: stock has a required return of 8%, the risk-free rate is 3.5%, and the market risk premium is 3%. a.…

A: CAPM is an abbreviation used for Capital asset pricing model. This model is used to determine the…

Q: Assume that the risk-free rate is 7.5% and the market risk premium is 5%. What is the required…

A: We need to use CAPM equation to calculate required rate of return. The equation is rs =Rf+beta…

Q: Assume that the risk-free rate is 3.5% and the expected return on the market is 10%. What is the…

A: Details given to us are : Risk free rate = 3.5% Expected return on market = 10% Beta = 0.7 We need…

Q: A stock has a required return of 13%, the risk-free rate is 4.5%, and the market risk premium is 4%.…

A: In order to calculate the stock's beta, we can use the the formula given under capital asset pricing…

Q: Assume that the risk-free rate is 5.5% and the market risk premium is 4.5%. What is the required…

A: Risk free rate = 5.5% Market risk premium = 4.5% Beta = 0.90

Q: Assume that the risk-free rate is 4.5% and the required return on the market is 11%. What is the…

A: Calculation of required rate of return on stock

Q: A stock has a beta of 1.22, the expected return on the market is 12 percent, and the risk- free rate…

A: given, beta = 1.22 expected market return ( rm) = 12% risk free rate ( rf) = 4%

Q: A stock has a beta of 1.12, the expected return on the market is 10 percent, and the free rate is 3…

A: In this we have to use capital assets pricing formula for calculation of expected return.

Q: A stock has a required return of 13%, the risk-free rate is 3%, and the market risk premium is 6%.…

A: Beta means the measure of changes in the stock in connection with the entire market. Beta is…

Q: A stock has a beta of 1.32, the expected return on the market is 10 percent, and the risk-free rate…

A: A stock is a financial instrument issued by a corporation to obtain equity funds. The required rate…

Q: A stock has a required return of 7%, the risk-free rate is 2.5%, and the market risk premium is 3%.…

A: Required rate of return as per CAPM :— Expected Return = Rf + (Rm - Rf) beta of the…

Q: A stock has an expected return of 11 percent, the risk-free rate is 6.1 percent, and the market risk…

A: Beta: The volatility of a stock in relation to the entire market is measured by its beta. Individual…

Q: A stock has a beta of 1.75, the expected return on the market is 15%, and the risk- free rate is 5%.…

A: In the given question we require to calculate the expected return on stock: According to Capital…

Q: Beta and required rate of return A stock has a required return of 11 percent; the risk-free rate is…

A: In the given question we require to compute the beta of stock from below details : Required return =…

Q: A stock has an expected return of 7.8 percent. The expected return on the market is 9 percent and…

A: Beta less than 1 signifies less systematic risk.

Q: A stock has a required return of 16%, the risk-free rate is 4%, and the market risk premium is 6%.…

A: a) As per CAPM, required rate of return = risk free rate + (beta * market risk premium)

Q: Assume the expected return on the market is 7 percent and the risk-free rate is 4 percent. a. What…

A: In the given question we have two parts: In Part (A) we need to compute expected return for a stock…

Q: A stock has an expected return of 16 percent, its beta is 0.45, and the risk-free rate is 6.4…

A: CAPM is an investment theory that establishes the relationship between the expected return and the…

Q: A stock has a required return of 10%, the risk-free rate is 3.5%, and the market risk premium is 3%.…

A: CAPM also is known as Capital Asset Pricing Model used in calculating the expected return on any…

Q: Assume that the risk-free rate is 6.5% and the required return on the market is 8%. What is the…

A: Given: Risk free rate =6.5%Required rate on the market =8%Beta =0.6

Q: Assume that the risk-free rate is 7.5% and the market risk premium is 8%. What is the required…

A: The required rate of return can be ascertained by using the Capital Asset Pricing Model (CAPM). The…

Q: Assume that the risk-free rate is 7.5% and the required return on the market is 13%. What is the…

A: CAPM describes the relationship between systematic risk and expected return for assets, particularly…

Q: stock has a required return of 8%, the risk-free rate is 3.5%, and the market risk premium is 3%. a.…

A: Given data; required rate of return = 8% risk free rate = 3.5% market risk premium = 3%

Q: Assume that the risk-free rate is 2.5% and the required return on the market is 13%. What is the…

A: Capital Asset Pricing Model (CAPM) is a fundamental portfolio and security selection model , to find…

Q: A stock has a beta of 1.55, the expected return on the market is 8%, and the risk-free rate is 15%.…

A: In the given question we are require to calculate the Expected return We can calculate the expected…

Q: A stock has an expected return of 13 percent, its beta is 1.35, and the expected return on the…

A: A risk-free rate of return is the return that an investor earns by investing in securities that have…

Q: A stock has a required return of 7%; the risk- free rate is 3.0%; and the market risk premium is 3%.…

A: Following details are given in the question : Required return on stock = 7% Risk free rate = 3%…

Q: Assume that the risk-free rate is 7.5% and the required return on the market is 10%. What is the…

A: The question is based on the concept of the capital asset pricing model (CAPM), the model explains…

Q: A stock has a required return of 16%, the risk-free rate is 5.5%, and the market risk premium is 4%.…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: A stock has an expected return of 11.4%, the risk-free rate is 5.5%, and the market risk premium is…

A: In the given question we are require to calculate the Beta: We can calculate the Beta using Capital…

Q: Assume that the risk-free rate is 5.5% and the required return on the market is 12%. What is the…

A: According to CAPM model: rstock=rf+βstock×rm-rf where, rf=risk free return rm = market return…

Q: A stock has an expected return of 12.25 percent. The beta of the stock is 1.15 and the risk-free…

A: The market risk premium can be calculated with the help of CAPM equation

Q: Stock A has a beta of 1.30, and its required return is 13.25%. Stock B's beta is 0.90. If the…

A: Given Beta of Stock A = 1.30 Risk free Rate = 4.75% Required return of stock A = 13.25%

Q: Assume that the risk-free rate is 2.5% and the required return on the market is 12%. What is the…

A: We need to use CAPM equation for calculation of required rate of return. The equation is…

Q: A stock has a beta of 0.81, the expected return on the market is 11%, and the risk- free rate is…

A: Following details are given in the question : Beta of stock = 0.81 Expected return on the market =…

Q: Assume that the risk-free rate is 7% and the required return on the market is 9%. What is the…

A: Every investor invests the amount in some securities in order to get a good return, however, the…

Q: A stock has an expected return of 14.5 percent, the risk-free rate is 5.65 percent, and the market…

A: Equation of CAPM (capital asset pricing model) equation can be used to find the beta of the stock:…

Q: A stock has a beta of 1.2, the expected return on the market is 9 percent, and the risk-free rate is…

A: Given, Beta =1.2 Expected Market Return = 9% Risk Free rate = 1.5% Formula to be used : CAPM…

Q: Assume that the risk-free rate is 6.5% and the market risk premium is 6%. What is the required…

A: Given Risk free Rate = 6.5% Market Risk Premium = 6% Beta =1.80

Q: The risk-free rate of return is 4.8 percent and the market risk premium is 15 percent. What is the…

A: Risk free rate = 4.8% Market risk premium = 15% Beta = 1.80

Question

100%

Assume the expected return on the market is 18 percent and the risk-free rate is 4 percent.

What is the expected return for a stock with a beta equal to 2.00? (Round answers to 2 decimal places, e.g. 0.25.)

Expected return

What is the market risk premium

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required return on (1) the market, (2) a stock with a beta of 1.0, and (3) a stock with a beta of 1.7?
Now assume that the stock is currently selling at $30.29. What is its expected rate of return?
An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
Assume the expected return on the market is 9 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 1.80? (Round answers to 2 decimal places, e.g. 15.25.) What is the market risk premium? (Round answers to 2 decimal places, e.g. 15.25.)
Assume the expected return on the market is 14 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 1.00? (Round answers to 2 decimal places, e.g. 15.25.) Expected return What is the market risk premium? (Round answers to 2 decimal places, e.g. 15.25.) Market risk premium
Assume that the risk-free rate is 2.8 percent, and that the market risk premium is 4.8 percent. If a stock has a required rate of return of 16.1 percent, what is its beta? Your Answer: Answer
Assume the expected return on the market is 16 percent and the risk-free rate is 4 percent. -What is the expected return for a stock with a beta equal to 0.50? - What is the market risk premium?
The risk-free rate is 5.6%, the market risk premium is 8.5%, and the stock’s beta is 2.27. What is the required rate of return on the stock, E(Ri)? Use the CAPM equation.
suppose a risk free rate is 6% and the market premium is 7%. D1 is 1.25 per share and stock beta is 1.15. What is the required return?
Assume that the risk-free rate is 2.5% and the market risk premium is 8%. What is the required return for the overall stock market? Round your answer to one decimal place. ? % What is the required rate of return on a stock with a beta of 0.5? Round your answer to one decimal place. ? % The above is a two part question, therefore the second answer is determined based off the first answer provided. Please, please, please do provide both answers.
(d) Suppose the risk-free rate is 4%, the market risk premium is 15% and the betas for stocks X and Y are 1.2 and 0.2 respectively. Using the CAPM model, estimate the required rates ofreturn of Stock X and Stock Y. (e) Given the results above, are Stocks X and Y overpriced or underpriced? Explain.
Assume the expected return on the market is 7 percent and the risk-free rate is 4 percent. a. What is the expected return for a stock with a beta equal to 1.10? (Enter your answers in decimals. Do not enter percent values.) b. What is the market risk premium? (Enter your answers in decimals. Do not enter percent values.)