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- 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?Suppose the risk-free return is 6.3% and the market portfolio has an expected return of 11.5% and a standard deviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.72. What is its expected return? The expected return is __ % ? (Round to two decimal places.)Suppose the risk-free return is 3.7% and the market portfolio has an expected return of 8.8% and a standard deviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.73. What is its expected return (Round to 2 decimal places)
- Suppose the risk-free return is 5.3% and the market portfolio has an expected return of 10.2% and a standard deviation of 16%. Loblaw Companies Limited stock has a beta of 0.32. What is its expected return? The expected return is%. (Enter your response as a percent rounded to two decimal places.)Assume that the risk-free rate is 6.5% and the required return on the market is 8%. What is the required rate of return on a stock with a beta of 0.6? Round your answer to two decimal places.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 the market risk premium is 9 % and also that the standard deviation of returns on the market portfolio is 0.26 . Further assume that the correlation between the returns on ABX (Barrick Gold) stock and returns on the market portfolio is 0.62 , while the standard deviation of returns on ABX stock is 0.36 . Finally assume that the risk-free rate is 2 %. Under the CAPM, what is the expected return on ABX stock? (write this number as a decimal and not as a percentage, e.g. 0.11 not 11%. Round your answer to three decimal places. For example 1.23450 or 1.23463 will be rounded to 1.235 while 1.23448 will be rounded to 1.234)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.)Suppose Stock A has B = 1 and an expected return of 11%. Stock B has a B = 1.5. The risk- free rate is 5%. Also consider that the covariance between B and the market is 0.135. Assume the CAPM is true. Answer the following questions: a) Calculate the expected return on share B. b) Find the equation of the Capital Market Line (CML). c) Build a portfolio Q with B = 0 using actions A and B. Indicate weights (interpret your result) and expected return of portfolio Q.
- Assume that the risk-free rate is 3.5% and the expected return on the market is 10%. What is the required rate of return on a stock with a beta of 0.7? Round your answer to two decimal places.Assume that the risk-free rate is 6.5% and the market risk premium is 6%. 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 1.8? Round your answer to one decimal place.Suppose the risk-free return is 3.5% and the market portfolio has an expected return of 11.9% and a volatility of 12.9% Merck & Co. (Ticker: MRK) stock has a 20.8% volatility and a correlation with the market of 0.065. a. What is Merck's beta with respect to the market? b. Under the CAPM assumptions, what is its expected return?