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- A stock has an expected return of 10.2%, the risk-free rate is 4.1% and the market risk premium is 7.2%. Calculate the beta of this stock. e(r) = rf + β(rm - rf)Give typing answer with explanation and conclusion the expected return on stock A is 11.35%. the expected return on stock B is 8.7%. assuming CAPM holds, if the beta of stock A is higher than the beta of stock B by 0.17, what should the risk premium be?b) Suppose that you observe the following information in Table 2 for stocks A and B: Table 2 Expected Return (%) 11% Stock Beta A 0.8 В 14% 1.5 The risk-free rate of return is 6% and the expected rate of return on the market index is 12%. Using the Single-Index Model, calculate the alpha of both stocks. Show your calculations. Explain what the alpha of the single-factor model represents and interpret your results.
- Give typing answer with explanation and conclusion Assume that the risk-free rate is 2.5% and the market risk premium is 5%. What is the required rate of return on a stock with a beta of 1.9? Round your answer to one decimal place.How do you find the market risk premium and market expected return given the expected return of stock, beta, and risk free rate? Example: The expected return of a stock with a beta of 1.2 is 16.2%. Calculate the market risk premium and the market expected return, given a risk-free rate of 3%.Assume that a stock has a beta of 1.5, the risk free interest rate is 4%,a and the market return is 6%. Find the stock return (expected return).
- b. A stock has an expected return of 14 percent, the risk-free rate is 4 percent, and the market risk premium is 6 percent. What must the beta of this stock be?suppose a risk free rate is 6% and the market premium is 7%. D1 is 1.25 per share and stock beta is 1.15. What is the required return?a. A stock has a beta of 1.2, the expected return on the market is 17 percent, and the risk-free rate is 8 percent. What must the expected return on this stock be?
- Suppose that you observe the following information in Table 2 for stocks A and B: Table 2 Expected Return (%) 11% Stock Beta A 0.8 B 14% 1.5 The risk-free rate of return is 6% and the expected rate of return on the market index is 12%. Using the Single-Index Model, calculate the alpha of both stocks. Show your calculations. Explain what the alpha of the single-factor model represents and interpret your results.The risk-free rate is 5.6%, the market risk premium is 8.5%, and the stock’s beta is 2.27. What is the required rate of return on the stock, E(Ri)? Use the CAPM equation.A stock has a required return of 11%, the risk- free is 7%, and the market risk premium is 4%. a. What is the stock's beta? b. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? What would it be? Assume that the risk-free rate and the beta remain unchanged.