Required: Investors expect the market rate of return this year to be 13.00 %. The expected rate of return on a stock with a beta of 1.6 is currently 20.80 %. If the market return this year turns out to be 11.40%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Revised rate of return %
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- Investors expect the market rate of return this year to be 17.00%. The expected rate of return on a stock with a beta of 0.9 is currently 15.30%. If the market return this year turns out to be 15.00%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)Consider the rate of return of stocks ABC and XYZ. Year 12345n ភ្នំឧ១៣៧. ABC ABC XYZ 22% 10 ABC 19 3 1 a. Calculate the arithmetic average return on these stocks over the sample period. (Round your answers to 2 decimal places.) Arithmetic Average XYZ 36% 10 17 0 -8 ABC XYZ b. Which stock has greater dispersion around the mean return? % c. Calculate the geometric average returns of each stock. What do you conclude? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Geometric Average %Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 -13 2 22 % Stock Y 15% 7 -4 3 12 Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. Market 13% 12 -10 2 15
- Answer the multiple-choice question below: 1.If you buy a stock for a price of $23 and if you expect the stock to pay a dividend of $1.242 one year from now and to grow at a constant rate g = 8% in the future, then the required rate of return will be __________. Select one: a.12.4% b.20.4% c.13.4% d.14.5%A stock is expected to pay a dividend of $0.50 at the end of the year (i.e., D1 = $0.50), and it should continue to grow at a constant rate of 10% a year. If its required return is 14%, what is the stock's expected price 1 year from today? Do not round intermediate calculations. Round your answer to the nearest cent.Answer the multiple-choice question below: 1. A stock price P0=$23, and is expected to pay D1 = $1.242 one year from now and to grow at a constant rate of g=8% in the future. Suppose this analysis was conducted in January 1, 2002, what is the expected price at the end of 2002 and what is the Capital gains yield? Select one: a. P 12/31/02 = $34.24; Capital gains Yield 2002 = $4.50% b. P 12/31/02 = $24.84; Capital gains Yield 2002 = $8.4% c. P 12/31/02 = $21.40; Capital gains Yield 2002 = $18.4% d. P 12/31/02 = $24.84; Capital gains Yield 2002 = $8.0%
- 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.)Consider a stock with a current price of P = $27.Suppose that over the next 6 months the stockprice will either go up by a factor of 1.41 or downby a factor of 0.71. Consider a call option on thestock with a strike price of $25 that expires in6 months. The risk-free rate is 6%.(1) Using the binomial model, what are the endingvalues of the stock price? What are the payoffsof the call option?ou expect the price of the stock 3 years from now to be $34.73 (i.e., you expect P3= $34.73). Discounted at a 12% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $34.73.
- Suppose you are attempting to value a 1-year expiration option on a stock with volatility (i.e., annualized standard deviation) of σ = .40. What would be the appropriate values for u and d if your binomial model is set up using:a. 1 period of 1 year.b. 4 subperiods, each 3 months.c. 12 subperiods, each 1 month.← You are thinking of buying a stock priced at $109.31 per share. Assume that the risk-free rate is about 4.03% and the market risk premium is 6.48%. If you think the stock will rise to $118.76 per share by the end of the year, at which time it will pay a $3.48 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is (Round to two decimal places.) ...You have observed the following returns over time: Year Stock X Stock Y Market 2017 14% 12% 13% 2018 21 7 8. 2019 -13 -7 -11 2020 2 3 2021 20 14 Assume that the risk-free rate is 6% and the market risk premium is 5%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: % Stock Y: % c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. %