Answered: A stock has a beta of .88 and an…

A stock has a beta of .88 and an expected return of 8.49 percent. If the risk-free rate is 2.4 percent, what is the stock's reward-to-risk ratio? 09.65% 6.06% 8.28% 6.92% 6.39%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

See similar textbooks

Related questions

Q: A stock has an expected return of 14.3 percent, the risk-free rate is 3.9 percent, and the market…

A: Given: Expected return = 14.3% Risk free rate = 3.9% Market risk premium = 7.8%

Q: A stock has an expected return of 12.5 percent and a beta of 1.16, and the expected return on the…

A: Expected return of stock (Er) = 0.125 (12.5%) Beta (b) = 1.16 Expected return on the market (Rm) =…

Q: A stock has a beta of 1.05, the expected return on the market is 14 percent, and the risk-free rate…

A: Stock Beta is 1.05 Expected return on market is 14% Risk free rate is 7.7% To Find: Expected return…

Q: A stock has an expected return of 16.5 percent, its beta is 1.50, and the risk-free rate is 4.5…

A: Given that the expected return on a stock is 16.5%, risk free rate is 4.5% and the beta is 1.50, we…

Q: A stock has a beta of 1.38, the expected return on the market is 10 percent, and the risk- free rate…

A: Expected return using CAPM model can be calculated using following formula :- Expected return = Risk…

Q: A stock has a beta of 1.07, the expected return on the market is 10.1 percent, and the risk- free…

A: Beta = 1.07 Market return = 10.1% Risk free rate = 4.9%

Q: The standard deviation of stock A's returns (σA) is 34%, and the standard deviation of the market…

A: Standard deviation of stock A's returns (σA) is 34% Standard deviation of the market portfolio (σM)…

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 an expected return of 10.8 percent, its beta is .97, and the risk-free rate is 6.1…

A: Capital asset pricing model (CAPM) describes the relationship between the risk and return of the…

Q: Demeter Designs stock has a beta of 0.68, the risk free rate is 1.85%, and the expected return on…

A: As per CAPM Ri = Rf + B (Rm - Rf) Where Ri = Return on equity Rf = Risk free rate of return B = Beta…

Q: A stock has an expected return of 14.2 percent, the risk-free rate is 6.5 percent, and the market…

A: Given: Expected return = 14.2% Risk free rate = 6.5% Market risk premium = 7.7%

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 beta of 0.8 and an expected return of 10.6 percent. If the risk-free rate is 2.7…

A: Given: Beta =0.8Expected return =10.6% Risk free rate =2.7%

Q: The risk-free rate of return is 3.7 percent and the market risk premium is 6.2 percent. What is the…

A: The given question can be solved using capital asset pricing model (CAPM)

Q: A stock has a beta of 1.2 and an expected return of 11.8 percent. A risk-free asset currently earns…

A: Portfolio refers to basket of different financial assets in which investment is made by single…

Q: A stock has a beta of 1.10, the expected return on the market is 12 percent, and the risk-free rate…

A: Given that the expected return on the market is 12%, risk free rate is 3.6% and the beta is 1.10, we…

Q: Stock A has a beta of 0.87 and an expected return of 9.21 percent. Stock B has a beta of 1.36 and an…

A: Expected return as per CAPM = Risk free rate + Beta * Market risk premium

Q: A stock has an expected return of 13.4 percent, its beta is 1.60, and the risk-free rate is 5.5…

A: We require to compute the expected market return (Rm) from following details : Expected return on…

Q: According to the CAPM, what is the required rate of return for a stock with a beta of 0.7, when the…

A: To calculate the required rate of return we use the below formula Required rate of return = Risk…

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

A: According to CAPM : beta of stock = ( expected return - risk free rate)/market risk premium

Q: Stock Y has a beta of 1.35 and an expected return of 14.30 percent. Stock Z has a beta of 0.75 and…

A: Formula: Expected return = Risk free rate + (Beta*Market risk premium)

Q: A stock has a beta of 1.5, the expected return on the market is 10 percent, and the risk-free rate…

A: In given question we need to compute the expected return for stock. According to Capital asset…

Q: A stock has an expected return of 14.3 percent, the risk-free rate is 3.2 percent, and the market…

A: Formula Expected return = Risk free rate+(Beta*Market risk premium) Where Expected return = 14.3%…

Q: By how much does the required return on the riskier stock exceed the required return on the less…

A: Required return: It is the minimum rate of return an investor will seek for investing in a company.…

Q: The risk-free rate is 4.2 percent and the market expected return is 11.1 percent. What is the…

A: The cost of equity is the rate of return required by the equity investors. We can use the CAPM…

Q: A stock has a beta of 1.68, the expected return on the market is 14.72, and the risk-free rate is…

A: As per CAPM formula Expected return on stock = Risk free return + Beta*(Market return-Risk free…

Q: A stock has an expected return of 9.9 percent, the risk-free rate is 1.8 percent, and the market…

A: Expected return = 9.9% Risk free rate = 1.8% Market risk premium = 4.3%

Q: A stock has an expected return of 15.6 percent, the risk-free rate is 6.2 percent, and the market…

A: Information Provided: Expected Return = 15.6% Risk-free rate = 6.2% Market Risk Premium = 7.7%

Q: A certain stock has a beta of 1.2. If the risk-free rate of return is 4.5 percent and the market…

A: Risk-free return = 4.5% Market risk premium = 8% a) Beta = 1.2 b) Beta = 1.08 CAPM formula: Expected…

Q: Snow Fooling stock has an expected return of 8.17 percent and its reward-to-risk ratio is 6.9…

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate ofreturn on an average…

A: The riskiness of security is measured by "Beta". Beta measures the volatility of the stock with…

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: A stock has a beta of .86 and an expected return of 8.45 percent. If the risk-free rate is 2.2…

A: Investors may manage their risk of losing amount on trade by calculating their reward to risk ratio…

Q: Suppose Autodesk stock has a beta of 2.17, whereas Costco stock has a beta of 0.71. If the…

A: Autodesk beta = 2.17 Costco beta = 0.71 Risk free rate = 6% Market return = 11.5% Autodesk weight =…

Q: Stock R has a beta of 2.0, Stock S has a beta of 0.35, the required return on an average stock is…

A: Stock R beta (BR) = 2.0 Stock S beta (BS) = 0.35 Risk free rate (RF) = 3% Market rate of return (RM)…

Q: The beta of M Simon Inc., stock is 1.6, whereas the risk-free rate of return is 0.06. If the…

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

Q: A stock has a beta of 1.23, the expected return on the market is 11.9 percent, and the risk-free…

A: the expected return on this stock = risk free rate + beta*market risk premium

Q: A stock has an expected return of 11.85 percent, its beta is 1.08, and the risk-free rate is 3.9…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: A stock has a beta of 1.4 and an expected return of 12.7 percent. If the risk-free rate is 4.9…

A: Following details are given to us in the question : Beta = 1.4 Expected Return (ER) = 12.7% Risk…

Q: Stock R has a beta of 1.9, Stock S has a beta of 0.45, the required return on an average stock is…

A: The Required Rate of Return is computed by using CAPM as follows: Required Rate of return =…

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average…

A: In this we have to calculate expected return of both stock using CAPM model and find the difference.

Q: A stock has a beta of 1.08, the expected return on the market is 10.2 percent, and the risk-free…

A: Expected return on the market (Rm) = 0.102 beta (b) = 1.08 Risk free rate (Rf) = 0.0485 Expected…

Q: A stock has a beta of 1.04, the expected return on the market is 11.75, and the risk-free rate is…

A: A stock is a financial security issued by companies to raise equity funds from the primary market.…

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

Q: A stock has a beta of 1.32 and an expected return of 12.8 percent. The risk-free rate is 3.6…

A: The slope of SML is Return of Market minus Rf. Note: Rf= Risk-free Rate SML= Security Market Line

Question

A stock has a beta of .88 and an expected return of 8.49 percent. If the risk-free rate is 2.4
percent, what is the stock's reward-to-risk ratio?
9.65%
O6.06%
8.28%
6.92%
6.39 %

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

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

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?
You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
A stock has an expected return of 12.69 percent and its reward-to-risk ratio is 7.6 percent. If the risk-free rate is 3.25 percent, what is the stock's beta? Show Transcribed Text O O 1.46 1.25 1.12 1.40 1.68
The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21? a. 11.4%b. 13.6%c. 15.4%d. 17%
The risk-free rate of return is 3.7 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21 O a. 10.92 percent O b. 11.40 percent O c. 11.20 percent O d. 12.47 percent
A stock has a beta of .86 and an expected return of 8.45 percent. If the risk-free rate is 2.2 percent, what is the stock's reward-to-risk ratio? Multiple Choice 6.71% 6.36% O 727% 8.55% 9.83%
A stock has a beta of .92 and an expected return of 8.57 percent. If the risk-free rate is 2.8 percent, what is the stock's reward-to-risk ratio? Multiple Choice 6.27% 7.79% 5.79% 5.49% 9.32%
Find the required rate of return on the market if: beta is 1.23, required return on the stock is 9.50%, and risk-free rate is 2.30% A. 9.87% B. 8.40% C. 8.15% D. 8.72% E. 8.32%
What is the expected return for Stock A if it has a beta of 1.25, the risk-free rate is 1.5%, and the expected market return is 10.2%? 12.38% 14.25% 12.75% 11.25% 10.88%
A stock's beta equals 1.34. If the risk-free rate is 1.3% and the market risk premium is 5.9%, what return should be required on this stock if the CAPM model holds? O 8.41% O 9.21% O 7.48% O 10.04% Onone of these
Question: A stock has an expected return of 9.7 percent, its beta is .89, and the risk-free rate is 2.9 percent. What must the expected return on the market be?
The risk-free rate of return is 4 percent and the market risk premium is 8 percent. What is the expected rate of return on a stock with a beta of 1.28? a. 9.12 percent b. 10.24 percent c. 13.12 percent d. 14.24 percent e. 5.36 percent