#39 At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.3 and the risk-free rate was about 4.7%. Apple's price was $81.87. Apple's price at theend of 2007 was $195.12. If you estimate the market risk premium to have been 6.2%, did Apple's managers exceed their investors' required return as given by theCAPM?The expected return is %. (Round to two decimal places.)The realized return is %. (Round to two decimal places.)(Select from the drop-down menu.)Did Apple's managers exceed their investors' required return as given by the CAPM?Can't determineYesNo

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Answered: At the beginning of 2007 (the year the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.2 and the risk-free rate was about 3.8%. Apple's price was $82.54. Apple's price at the end of 2007 was $190.92. If you estimate the market risk premium to have been 6.7%, did Apple's managers exceed their investors' required return as given by the CAPM? The expected return is%. (Round to two decimal places.)
At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.4 and the risk-free rate was about 3.6%. Apple's price was $82.49. Apple's price at the end of 2007 was $194.92. If you estimate the market risk premium to have been 6.7%, did Apple's managers exceed their investors' required return as given by the CAPM? The expected retun is %. (Round to two decimal places.)
At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.3 and the risk-free rate was about 4.5%. Apple's price was $82.23. Apple's price at the end of 2007 was $190.22. If you estimate the market risk premium to have been 5.3%, did Apple's managers exceed their investors' required return as given by the CAPM? The expected return is %. (Round to two decimal places.) The realized return is %. (Round to two decimal places.) (Select from the drop-down menu.) Did Apple's managers exceed their investors' required return as given by the CAPM?
At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.3 and the risk-free rate was about 4.5%. Apple's price was $82.72. Apple's price at the end of 2007 was $193.19. If you estimate the market risk premium to have been 6.3%, did Apple's managers exceed their investors' required return as given by the CAPM?
At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.3 and the risk-free rate was about 3.8%. Apple's price was $83.17. Apple's price at the end of 2007 was $197.84. If you estimate the market risk premium to have been 5.8%, did Apple's managers exceed their investors' required return as given by the CAPM?
K At the beginning of 2007 (the year the iPhone was introduced), Apple's beta was 1.51 and the risk-free rate was about 4.69%. Apple's price was $81.44. Apple's price at the end of 2007 was $190.41. If you estimate the market risk premium to have been 5.59%, did Apple's managers exceed their investors' required return as given by the CAPM? The expected return is %. (Round to two decimal places.)
4) XYZ has a beta of 1.5. The annualized market return yesterday was 14%, and the risk-free rate is currently 1%. You observe that XYZ had an annualized return yesterday of 20%. Assuming that markets are efficient, this suggests that A) bad news about Matthews was announced yesterday. B) good news about Matthews was announced yesterday. C) no news about Matthews was announced yesterday. D) interest rates rose yesterday. E) interest rates fell yesterday. Please justify your answer.
The S&P500 has an expected return of 15.8%. The riskless rate is 2.7% and XYZ's beta is 1.3. What should the expected return on XYZ stock be according to CAPM?
Amazon has a beta of 0.6. The risk-free rate is 1.2% and the expected return on the S&P500 is 6%. What is Amazon's cost of equity?
Assume that the risk-free rate, RF, is currently 8%, the market return, RM, is 12%, and asset A has a beta, of 1.10. (could be done on word document or excel). Draw the security market line (SML) Use the CAPM to calculate the required return, on asset A. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to be14%. Ignoring the shift in part c, draw the new SML on the same set of axes that you used before, and calculate and show the new required return for asset A.
Widget Manufacturing, Inc. has an average return of 13.4%, a beta of 1.1, and a standard deviation of 43.8%. You know the risk-free rate is 2.2%, the market return is 8.4%, and the market standard deviation is 25.8%. What is the M2 of Widget Manufacturing, Inc.? Enter your answer without the % symbol (so if your answer is -1.2%, type -1.2)
Suppose Pepsi Co. has a beta of 0.7, whereas the beta of Microsoft is 1.1. The risk free interest rate is 3% and the market risk premium is 6%. a. What is the expected return of Pepsi Co. according to CAPM? b. What is the expected return of Microsoft according to the CAPM?

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