If an average share of stock is expected to yield a return of 7.2% and comparable Treasury bonds yield a return of 3.6%, what is the market risk premium? Give your answer in percentage terms to one decimal place accuracy.

Q: Suppose the common stock of United Industries has a beta of 1.09 and an expected return of 13.9…

A: Introduction: When it comes to the stock market, investors need to understand every term and phrase.…

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: A security's or investment portfolio's sensitivity or connection to changes in the overall market is…

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: The beta coefficient factor is the degree of volatility present with the stock investment in…

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: ParticularsStock AStock BBeta0.700.90R-square0.200.15σM22%

Q: A stock has an expected return of 12.91 percent. The beta of the stock is 1.2 and the risk-free rate…

A: The market risk premium is an important concept when the expected return for the stock is…

Q: The expected return for a stock, calculated using the CAPM is 13.5%. The risk free rate is 7.5% and…

A: In the given problem we are required to calculate the implied return on market using following…

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: Given: Required returnr=8%Risk free raterRF=3%Market returnrM=12%

Q: Estimate the return and standard deviation of the historical returns on Stock A that were: 15%, 20%,…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: If the yearly geometric mean of the stock risk premium is 9.4%, how much of the equity risk premium…

A: Equity risk premium is the difference between average return on stocks and the average return on…

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: According to capital asset pricing model Expected return on stock = Risk free rate+Beta×Market…

Q: The risk-free rate of return is 2.3 percent, the inflation rate is 3.1 percent, and the market risk…

A: CAPM is capital asset pricing model which is used for calculating expected or required rate of…

Q: A stock has an expected return of 17 percent, its beta is 1.35, and the risk-free rate is 4 percent.…

A: CAPM is capital asset pricing model to compute the cost of equity based on company risk index as…

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 will provide a rate of return of either -29% or 34% If both possibilities are equally…

A: Expected return = summation of [probability ×return]

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: Given: Return = 8% Risk free rate (rRF )= 3% Market rate (rM) = 12%.

Q: The following factors were identified regarding Stock B. the stock sensitivity to each factor and…

A: Expected return on asset using multiple factor model is calculated as Expected return on asset = Rf…

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 risk premium of 7 percent and a beta of 1.4. If the risk-free rate is 2.2 percent.…

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

Q: The expected return on stock A is 11.70 percent. The expected return on stock B is 9.40 percent.…

A: The objective of the question is to calculate the risk premium using the Capital Asset Pricing Model…

Q: A stock's beta is 1.6 and the market risk premium is 7.7%.  If the risk-free rate is 3.5%, what is…

A: Capital Asset Pricing Model ( CAPM) is an alternative model to find out the required rate of return…

Q: What are the arithmetic and geometric (Answer in that order.) average returns for a stock with…

A: Returns 9.4% 8.2% -8.3% 4.1% 9.5%

Q: A stock has a beta of 1.2 and an expected return of 11.6 percent. If the risk-free rate is 5.1…

A: Given,  Expected return 11.6 percent. risk-free rate is 5.1 percent

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: The objective of the question is to calculate the beta coefficient for Stock L. The beta coefficient…

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: Given: Expected return = 13.75% Risk free rate = 5.85% Market rate = 11.5%

Q: Percentages need to be entered in decimal format, for instance 3% would be entered as .03. That is…

A: Note: Return of the stock is taken what was provided in the previous question. Please adjust the…

Q: A stock has an expected return of 15.9 percent and a beta of 1.70, and the expected return on the…

A: The Capital Asset Pricing Model (CAPM) refers to the model which tells us how the financial markets…

Q: Suppose that the index model for stocks A and B is est RA= 3.6% + 1.20 RM + eA RB 1.6 % + 1.50RM +…

A: Stock market:The stock market is a dynamic financial marketplace where buyers and sellers trade…

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: According to CAPM, the formula to compute expected rate of return is equals to Expected rate of…

Q: If the annual geometric mean for the equity risk premium is 8.4 percent, what percentage of the…

A: Calculation of Percentage of Equity Risk Premium:

Q: A stock has an expected return of 10.99 percent, the risk-free rate is 2.46 percent, and the market…

A: Expected return = 10.99%Risk-free rate = 2.46%Market risk premium = 4.95%To find: Beta of the stock.…

Q: Suppose the common stock of United Industries has a beta of 1.18 and an expected return of 11.9…

A: Market risk premium= Rm-Rfwhere,Rm= market returnRf= Risk-free rate

Q: The risk-free rate is 3% and the market risk premium is 9%.  If stock A has a beta of -0.9, what is…

A: Formulas: Required return = Risk free rate + (Beta*Market risk premium)

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: The provided information are: Expected returnrL=8%=0.08Risk-free raterRF=3%=0.03Market…

Q: The risk-free rate of return is 3.75 percent and the market risk premium is 6.5 percent. What is the…

A: Risk free rate of return = rf = 3.75% Market risk premium = mrp = 6.5% Beta = b = 0.84

Q: Stock A has a risk premium of 4.3 percent. If Treasury bills yield 2.0 percent and the expected…

A: Risk Premium = Expected Return on Stock A - Risk-free Rate Expected Return on Stock A = Risk-free…

Q: A stock has an expected return of 7.72 percent, the risk-free rate is 2.9 percent, and the market…

A: We can calculate Beta by using the CAPM model as it helps in showing the relationship between the…

Q: How do you calcuate the bechmark and historical return for the stock ARKK when the last price listed…

A: Examining historical return can give an understanding into how a security or market has responded to…

Q: A stock has a required return of 7%; the risk- free rate is 3.0%; and the market risk premium is 3%.…

A: Following details are given in the question : Required return on stock = 7% Risk free rate = 3%…

Q: According to the CAPM as stock has a risk premium of 10.4%.  If the risk-free rate is 2.5%, what is…

A: Risk premium = 10.4% Risk free rate = 2.5%

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: Given: rL = 8%, rRf = 3%, rm = 12%

Q: Two stocks, A and B, have beta coefficients of 1.0 and 0.4, respectively. If the expected return on…

A:

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: The beta coefficient can be calculated with the help of CAPM equation.

Q: A stock has an expected return of 18.0 percent, a beta of 1.90, and the return on the market is…

A: 2Investors have different options for making investments, and the motive behind investments is to…

Q: A stock has an expected return of 15.2 percent, the risk-free rate is 3.4 percent, and the market…

A: As per CAPM model, expected return = risk free rate + beta*market risk premium

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: The degree by which the stock returns will deviate or move along in the same direction as changes in…

Q: suppose the common stock of United Industries has a beta of 1.19 and an expected return of 11.8…

A: The market risk premium is the excess return that investors expect to earn from the market over and…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.