Stock Z has a beta of 2 and an expected return of 10%. If Treasury Bills currently return 1% and the expected return on the S&P 500 is 7%, is this stock correctly priced, underpriced, or overpriced? Graph the security market line and Stock Z. Label all relevant details. What does beta represent? Explain the

3. Assume that the market is in equilibrium and that stock betas can be estimated with historical data. The returns on the market, the returns on United Fund (UF), the risk-free rate (7.00%), and the required return on the United Fund (15.00%) are shown below. Based on this information, what is the required return on the market, ? Year 2011 2012 2013 2014 2015 Market -9% 11% 15% 5% -1% UF -14% 16% 22% 7% -2%

1.Gray corporation has a beta of 1.3, the risk-free rate is 3.8 percent and the return on the market is 10 percent. 1.calculate the required rate of return, the market risk premium, and the security risk premium. 2.graph the security market line and identify on the graph the market risk premium and the security risk premium.

Syntex, Inc. is considering an investment in one of two common stocks. Given the information that​ follows, which investment is​ better, based on the risk​ (as measured by the standard​ deviation) and​ return?   Common Stock A              Common Stock B              Probability Return Probability Return 0.35 13​% 0.25 −7​%   0.30 17​% 0.25 8​%   0.35 21​% 0.25 15​%       0.25 23​%   ​(Click on the icon    in order to copy its contents into a spreadsheet.​)       Question content area bottom Part 1 a.  Given the information in the​ table, the expected rate of return for stock A is enter your response here​%. ​(Round to two decimal​ places.)

Question: A stock has an expected return of 9.7 percent, its beta is .89, and the risk-free rate is 2.9 percent. What must the expected return on the market be?

Using CAPM to determine the expected rate of return for risky assets, consider the following example stocks, assuming that you have already compute the betas   Stock                                       Beta A                                              0.70 B                                              1.00 C                                              1.15 D                                              1.40 E                                              -0.30 Assume that we expect the economy’s RFR to be 5 percent (0.05) and the expected return on the market portfolio  (E(RM)) to be 9 percent (0.09), 1, what would this imply?  With these inputs, what would the be the following required rate of returns for these five stocks, show the formula for each in your calculations.

A stock has a beta of 1.08, the expected return on the market is 0.09, and the risk-free rate is 0.06. What must the expected return on this stock be? Enter the answer with 4 decimals (e.g. 0.1234).

Mulherin's stock has a beta of 1.34, its required return is 8.33%, and the risk-free rate is 2.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Do not round your intermediate calculations. Please explain process and show calculations.

You are trying to figure out the risk-free rate estimate.  Here is information about a stock's CAPM return: The beta is 0.9 The market risk premium is 5.2% The stock's return is 10% Given this information, what is the estimate for the risk-free rate?   Answer:

The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows.   For graph see image 13a   CAPM Elements Value Risk-free rate (rRFRF)      Market risk premium (RPMM)      Happy Corp. stock’s beta      Required rate of return on Happy Corp. stock        An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.’s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst’s prediction. Happy Corp.’s new required rate of return is  _____?.     For grapgh see image 13b   The SML helps determine the level of risk aversion among investors.…