Investors currently expect inflation to average 2.5% in the future, while the real risk-free rate is 1.5%. If ACME company has a beta of 1.4 and its realized rate of return has averaged 6.5% over the past 5 years, what is its required rate of return if the market risk premium is 7%? 13.5% 13.3% 14.3% 13.8% O 14.1%
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- The investors expect a 5 % rate of inflation in the future. The real risk-free rate is 3 % and the market risk premium is 5%. Mercury Inc. has a beta of 2.0, and its realized rate of return has averaged 15 %over the last 5 years. Calculate the required rate of return for Mercury Inc. а. 15% b. 16% С. 17% d. 18%Give typing answer with explanation and conclusion to all parts The real risk-free rate, r*, is 2%, and inflation is expected to be 3.0% this year, 3.5% for the next two years; 4.0% the following year, and then 5.0% thereafter. The maturity risk premium is estimated to be 0.05%(t1), where t = number of years to maturity. Liquidity risk premium is 0.7%, default risk premium is 1%. - What are the Treasury yield for 3 years, and 6 years bonds? - What are the Corporate yield for 3 years, and 6 years bonds?Calculate the required rate of return for Best Inc., assuming that (1) investors expect a 1.5% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 3.0%, (4) the firm has a beta of 1.2, and (5) its realized rate of return has averaged 10.0% over the last 5 years.
- What is Loco Inc's required rate of return if it has a beta of 0.82, that market risk premium of 4.7%, investors expect a 3% future inflation rate, and the real risk-free rate is 2%. A. 6.73% B. 6.64% C. 9.30% D. 9.56% E. 8.85%Suppose the real risk-free rate is 3.2%, the average future inflation rate is 1.9%, and a maturity premium of 0.05% per year to maturity applies, i.e., MRP = 0.05% (t), where t is the years to maturity. What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is NOT valid? O 6.25% O 6.55% O 5.65% O 5.95% O 5.35%Investors expect a 4.5% rate of inflation in the future. the real risk-free rate is 3.5% and the market risk premium is 5.0%. Isbell Enterprises has a beta of 1.7. Calculate the required rate of return for Isbell Enterprises
- Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) the firm has a beta of 2.30, and (5) its realized rate of return has averaged 15.0% over the last 5 years. Do not round your intermediateSuppose the real risk-free rate of interest is r*=4%�*=4% and it is expected to remain constant over time. Inflation is expected to be 1.60% per year for the next two years and 3.90% per year for the next three years. The maturity risk premium is 0.1×(t−1)%0.1×�−1%, where t� is number of years to maturity, a liquidity premium is 0.45%, and the default risk premium for a corporate bond is 1.40%. The average inflation during the first 4 years is2.37% . What is the yield on a 4-year Treasury bond? 4.30% 8.90% 6.75% 7.05% What is the yield on a 4-year BBB-rated bond? 8.90% 7.50% 7.05% 8.45% If the yield on a 5–year Treasury bond is 7.38% and the yield on a 6–year Treasury bond is 7.83%, the expected inflation in 6 years is . (Hint: Do not round intermediate calculations.)Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 2.7%, (3) the market risk premium is 5.2%, (4) the firm has a beta of 0.90, and (5) its realized rate of return has averaged 15.0% over the last 5 years. Do not round your intermediate calculations. Please explain process and show calculations.
- The market price of a security is $100 and the expected return is 15%. The risk-free rate is 7% and the market risk premium is 10%. The firm pays a dividend every year. What is the percentage change of the market price today if the correlation of the security return with the market portfolio return doubles?Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, and a maturity premium of 0.10% per year to maturity applies, i.e., MRP = 0.10. What rate of return would you expect on a 1-year (short term) Treasury security?The real risk-free rate, r*, is 1.7%. Inflation is expected toaverage 1.5% a year for the next 4 years, after which time inflation is expected to average4.8% a year. Assume that there is no maturity risk premium. An 11-year corporatebond has a yield of 8.7%, which includes a liquidity premium of 0.3%. What is itsdefault risk premium?