A stock has an expected return of 11 percent, its beta is 1.20, and the risk-free rate is 4.4percent. What must the expected return on the market be? (Do not round intermediatecalculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.)Answer is complete but not entirely correct.12.32%Market expected return

Formula to Calculate the Expected Equity Return as belowExpected Equity Return = Risk Free return +…

Answered: A stock has an expected return of 11…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Ο A stock has a required return of 16%, the risk-free rate is 5.5%, and the market risk premium is 4%. a. What is the stock's beta? Round your answer to two decimal places. b. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. I. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. III. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. IV. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk…
A stock has an expected return of 18.0 percent, a beta of 1.90, and the return on the market is 11.60 percent. What must the risk-free rate be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Risk-free rate
A stock has a beta of 1.08, the expected return on the market is 0.09, and the risk-free rate is 0.06. What must the expected return on this stock be? Enter the answer with 4 decimals (e.g. 0.1234).
Consider the following multifactor (APT) model of security returns for a particular stock. Factor Risk Premium 8% 9 7 Factor Inflation Industrial production Oil prices Factor Beta 1.1 0.6 0.3 a. If T-bills currently offer a 7% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) X Answer is complete but not entirely correct. Expected rate of return 19.0 X %
Consider the following information on Stocks I and II: Probability of State of Economy State of Economy Rate of Return if State Occurs Stock I Stock II Recession .22 .045 -.37 Normal .62 .355 .29 Irrational .16 exuberance .215 .47 The market risk premium is 11.7 percent, and the risk-free rate is 4.7 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock 1.94 % %
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (7 %) (26 %) 0.1 3 0 0.5 14 22 0.2 20 26 0.1 36 50 Calculate the expected rate of return, , for Stock B ( = 14.20%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.68%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. If Stock B is more highly correlated with the market than A, then it might have a higher…
Stock A has a beta of 1, the risk-free rate is 4% and the return on the market is 9%. If the market risk premium changes by 7%, by how much will the required return on Stock A change? (i.e. required return after change - required return before the change) answer format: show your answer in percent (without the % sign) and to 1 decimal place. For example, 12.56 should be shown as 12.6
None
A stock has a beta of 1.11, the expected return on the market is 10.5 percent, and the risk- free rate is 4.7 percent. What must the expected return on this stock be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return 4 %
A stock has an expected return of 12.7 percent, its beta is 1.80, and the risk-free rate is 3.2 percent. What must the expected return on the market be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
U Assume CAPM holds. We know expected return and beta of two stocks: Stock A: E[ra] = 10% and beta_a = 1.5 Stock B: E[rb] = 5% and beta_b = 0.5 What would be the expected return of a stock that has a beta of 0.9? O 6.5% Ⓒ7% O 7.5% O 6% Question 5 Which of the following statements is false? o The CAPM follows from equilibrium conditions in a frictionless mean-variance economy with rational investors According to CAPM, everyone should hold a mix of the market portfolio and the risk-free asset. According to CAPM, everyone can generate positive return by buying positive alpha stocks and by selling negative alpha stocks. According to CAPM, the expected return on a stock is a linear function of its beta.
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession .17 .08 −.12 Normal .58 .11 .17 Boom .25 .16 .34 a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS