Stock A has a beta of 1.2, stock B has a beta of 0.6, the expected rate of return on an average stock is 12 per cent and the risk-free rate of return is 7 per cent. By how much does the required rate return on the riskier stock exceed the required return on the less risky stock

Q: A stock's beta is 1.8 and the market risk premium is 6.6%.  If the risk-free rate is 3.1%, what is…

A: The risk premium refers to the extra return over the risk-free rate that the stock provides for its…

Q: B. Assume the required return on the market is 7.5% and the risk-free rate is 2.1%. What is the…

A: Given details are : Required return of market (Rm) = 7.5% Risk free rate (Rf) = 2.1% Beta = 0.7 From…

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.95, the required return on an average stock is…

A: Required rate of return is defined as the minimum return regarding an investor, which is used to…

Q: The risk-free rate is 5.6%, the market risk premium is 8.5%, and the stock's beta is 2.27. What is…

A: Following details are given in the question: Risk free rate = 5.6% Market Risk premium = 8.5%…

Q: Stock Y has a beta of 1.30 and an expected return of 13.0%. Stock Z has a beta of .75 and an…

A: We will calculate the expected return using the Capital Asset Pricing Method and then compare with…

Q: Stock Y has a beta of 1.50 and an expected return of 14.2 percent. Stock Z has a beta of .85 and an…

A: CAPM is the capital asset pricing model and is used to find the required return using the following…

Q: Assume a stock has a required return on equity, ?? = 12%. The risk-free rate is ?? = 5% and the…

A: The mathematical equation for the concept is:

Q: Assume you have invested in two other stocks: Stock A has a beta of 1.20 and Stock B has a beta of…

A: Required return calculation is wrong. Correct solution is provided below.…

Q: Assume that the risk-free rate is 4% and the required return on the market is 11%. What is the…

A: Risk free rate = 4% Market return = 11% Beta = 1.39

Q: 5. Stock A has a beta of 0.50 and Stock B has a beta of 1.25. Suppose if is 4% and Rm 1S 10%. a.…

A: Solution:- As per security market line, ie. Formula of Capital Asset Pricing Model (CAPM),  E(R) =…

Q: A stock has an expected return of 14.1 percent, a beta of 1.8, and the return on the market is 9.8…

A: Expected return (Re) = 14.1% Beta (B) = 1.8 Market return (Rm) = 9.8% Risk free rate = Rf

Q: Assume that the risk-free rate is 7.5% and the required return on the market is 13%. What is the…

A: In the Given Question we require to calculate the required rate of return on a stock using following…

Q: Stock Y has a beta of 0.9 and an expected return of 11.4 percent. Stock Z has a beta of 1.5 and an…

A: Expected return is an important metric in investment analysis, as it helps investors assess the…

Q: Company A has a beta of 0.9 , while Company B's beta is 1.4 . The market risk premium is 13.78 %,…

A: The Capital Asset Pricing Model (CAPM) illustrates the relationship between systematic risk, or the…

Q: Stock R has a beta of 1.4, Stock S has a beta of 0.95, the expected rate of return on an average…

A: The required return of the stock is calculated using the Capital asset pricing model(CAPM ).    The…

Q: Suppose stock returns have a 2-factor structure. You observe a broad stock market portfolio A which…

A: Portfolio A return (Ra) = 7.4% Portfolio B return (Rb) = 10.6% Beta of first factor for A (A1) = 0.5…

Q: A stock has an expected return of 16 percent, its beta is 0.6, and the risk-free rate is 6.4…

A: Given the following information: Expected return on stock (r) = 16% Beta (b) = 0.6 Risk free rate…

Q: By how much does the required return on the riskier stock exceed the required return on the less…

A: Required return: It is the minimum rate of return an investor will seek for investing in a company.…

Q: Stock H has a beta of 1.6, while Stock L has a beta of 0.7.  If investors’ aversion to risk…

A: Risk:Risk is taking a chance, when the amount gets invested then there is a risk factor which means…

Q: Stock R has an expected rate of return of 9.5%, stock S has a beta of 1.2, the expected rate of…

A: In the given question we require to compute the beta of stock R and expected rate of return for…

Q: Stock R has a beta of 2.0, Stock S has a beta of 0.75, the required return on an average stock is…

A: Given, The Beta of Stock R is 2 The beta of stock S is 0.75 Average stock return is 14% Risk free…

Q: Stock A has a beta of 1.5 and Stock B has a beta of 0.8. Which of the following statements is most…

A: Beta is an important measure of risk used to evaluate stocks. It is a measure of a stock's…

Q: For a stock that has a beta of 1.4 and an expected return of 13%, whilst the expected risk premium…

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

Q: Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of 8 and an…

A: Reward to Risk Ratio= (Expected return - Risk free rate) / Beta of Stock

Q: A stock has an expected return of 13.4 percent and a beta of 1.15, and the expected return on the…

A: The Capital Asset Pricing Model (CAPM) is a financial model that establishes a relationship between…

Q: Required Rate of Return Stock R has a beta of 1.8, Stock S has a beta of 0.35, the expected rate of…

A: Beta coefficient shows the systematic risk of the assets. The beta factor shows the systematic risk…

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.85, the required return on an average stock is…

A: The objective of the question is to find out the difference in the required returns of two stocks…

Q: A stock has an expected return of 9.9 percent, the risk-free rate is 1.8 percent, and the market…

A: Expected return = 9.9% Risk free rate = 1.8% Market risk premium = 4.3%

Q: Suppose that the risk-free rate is 3% and the market risk premium is 8%. According to the CAPM,what…

A: The capital asset pricing model is the tool used to analyze the relationship between the risk and…

Q: A stock has an expected return (rs) of 10.4%, the risk-free rate (fer) is 1.7%, and market risk…

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

Q: You are trying to figure out the risk-free rate estimate.  Here is information about a stock's CAPM…

A: As per the CAPM model return can be calculated as under. Stock Return = Risk free Return + (Return…

Q: Stock Y has a beta of 1.45 and an expected return of 13.50 percent. Stock Z has a beta of .70 and an…

A: In this question  we are given expected returns and beta of two stocks i.e. Stock Y and Stock Z and…

Q: Stock X has a beta of 2.5, Stock B has a beta of 0.65, the required return on an average stock is…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of .7 and an…

A: Step 1:Reward to risk=(return-risk free rate)/betaReward to risk ratioStock…

Q: Stock A has a beta of 1.30, and its required return is 13.25%.  Stock B's beta is 0.90.  If the…

A: Given Beta of Stock A = 1.30 Risk free Rate = 4.75% Required return of stock A = 13.25%

Q: A stock has a beta of 1.1. The expected return on the market is 6.18 percent and the risk free rate…

A: Expected Return = Risk Free Rate + Beta ×Market Return -Risk Free Rate Risk Free Rate is 2% Beta is…

Q: Stock R has a beta of 2.0, Stock S has a beta of 0.35, the required return on an average stock is…

A: Stock R beta (BR) = 2.0 Stock S beta (BS) = 0.35 Risk free rate (RF) = 3% Market rate of return (RM)…

Q: The risk-free rate is 1.41% and the expected return on the market 10.36%. A stock with a β of 1.52…

A: CAPM stands for Capital Asset Pricing Model which indicates the relation between the expected…

Q: A stock has an expected return of 0.11, its bets is 0.82, and the risk-free rate is 0.04. What must…

A: Capital asset pricing model is used to compute the expected return from a stock:The expected rate of…

Q: Stock R has a beta of 1.7, Stock S has a beta of 0.8, the required return on an average stock is…

A: The question is based on the concept of the capital asset pricing model (CAPM). CAPM explains the…

Q: A stock has a required return of 10%; the risk- free rate is 3.5%, and the market risk premium is…

A: The Capital Asset Pricing Model (CAPM) is the model which shows the relationship between the…

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.85, the required return on an average stock is…

A: Given, beta(stock R)=1.5 beta(stock S)=0.85 Average stock=9% Rate of return=3%