6. You are given the following information: Return on three month T - bills - 6% Expected return on S&P 500 = 9% Draw the security - market line. Calculate the expected rate of return on a stock with a beta equal to 1.5.

6. You are given the following information: Return on three month T - bills - 6% Expected return on S&P 500 = 9% Draw the security - market line. Calculate the expected rate of return on a stock with a beta equal to 1.5.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

6. You are given the following information: Return on
three month T - bills - 6% Expected return on S&P
500 = 9% Draw the security - market line. Calculate the
expected rate of return on a stock with a beta equal to
1.5.

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unit 8- 7
Check My Work eBook Assume that the risk-free rate is 7.5% and the required return on the market is 10%. What is the required rate of return on a stock with a beta of 3? Round your answer to two decimal places. %
Consider a stock with a current price of P = $27.Suppose that over the next 6 months the stockprice will either go up by a factor of 1.41 or downby a factor of 0.71. Consider a call option on thestock with a strike price of $25 that expires in6 months. The risk-free rate is 6%.(1) Using the binomial model, what are the endingvalues of the stock price? What are the payoffsof the call option?
D3) An analyst gathers the following data: · Expected rate of return on the market = 14% · Current Dividend = $2 · Growth rate in dividends = 6% per year · Risk Free Rate = 8% · Expected rate of return on stock X if you buy at current price = 16% · Stock X’s beta = 1.25 Using this data, is this stock underpriced or overpriced and by how much (in % return).
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The market price of a security is $50. Its expected rate of return is 10%. The risk-free rate is 5%, 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. (Round your answer to 2 decimal places.)
Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 3.4% rate of inflation in the future. The real risk-free rate is 2.0%, and the market risk premium is 6.0%. Mudd has a beta of 1.5, and its realized rate of return has averaged 9.0% over the past 5 years. Round your answer to two decimal places.
Please fast step by step full solution
Risk-Free rate (Rf) is 5% Market risk premium (Rm-Rf) is 5% Beta of the stock is 1.5 Last dividend (D0) is 1.00 AZN Next year dividend (D1) will be 10% higher Next year price (P1) will be 25.00 AZN With this given information, what is the stock price (P0) now? 21.24 AZN 0.97 AZN 23.20 AZN 22.22 AZN
Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ 1 22 % 34 % 2 12 12 3 14 18 4 7 0 5 1 −8 1. If you were equally likely to earn a return of 22%, 12%, 14%, 7%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations.) 2. What if the five possible outcomes were those of stock XYZ? 3. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance? A. Arithmetic B. Geometric
Currently, the risk-free return is 2 percent, and the expected market rate of return is 11 percent. What is the expected return of the following three-stock portfolio? Do not round intermediate calculations. Round your answer to two decimal places. Investment Beta $ 200,000 1.0 100,000 0.1 700,000 2.9 %

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