Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- The risk-free rate is 3.7% and you believe that the S&P 500's excess return will be 11% over the next year. If you invest in a stock with a beta of 1 (and a standard deviation of 30%), what is your best guess as to its expected excess return over the next year? Question content area bottom Part 1 The expected excess return over the next year is enter your response here %. (Round to two decimal places.)arrow_forwardSuppose that =7% (na1), and that future short term (1 year) interest rates are expected to be 5% and 3% (for the subsequent two years). The liquidity premium for n2 and 3 is 0.25% and 0.35% respectively. a. Use the liquidity premium theory to calculate for ne2 and 3, and then plot the yield curve using your results. CALCULATE showing all work and ALL formulas that you use, b. Discuss what would be the impact on the yield curve in part a. if future short term rates were suddenly expected to rise.arrow_forwardBhupatbhaiarrow_forward
- B Bhupatbhaiarrow_forwardYou are reviewing a five-year monthly return regression of returns for Jamesway Corp, a U.S.-based consumer product company, against the S&P 500. 0.8 ReturnJamesway = 0.25% + 0.80*ReturnS&P 500 (R2 = 25%). The U.S. treasury bond rate is currently 4.75%, the treasury bill rate today is 4.25% and the historical equity risk premium is 4.91%. b. Based upon this regression, estimate the long-term cost of equity in $ currency terms for this company. a. 9.66% b. 7.48% c. 8.68% d. 10.25%arrow_forwardInvestors expect a 2.0% rate of inflation in the future. The real risk-free rate is 1.0%, and the market risk premium is 6.0%. Isbell Enterprises has a beta of 1.1. Calculate the required rate of return for Isbell Enterprises. (Answer as a percent with 2 decimal places. For example, 10 percent should be entered as 10.00. Do not use the % sign.)arrow_forward
- Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 4.3% rate of inflation in the future. The real risk-free rate is 2.0%, and the market risk premium is 7.0%. Mudd has a beta of 1.2, and its realized rate of return has averaged 12.0% over the past 5 years. Round your answer to two decimal places.arrow_forwardJensen Corp. has an expected excess return of 3% for the coming year. The company's beta is 0.8 and the expected market rate of return is 10%. Suppose that the actual market rate of return is 13%. Based on this information, what is your revised expectation for Jensen's excess return? a) 6.0% b) 12.4% c) 5.4% d) 15.4%arrow_forwardNikularrow_forward
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