Suppose that the risk-free rate is 3% and the expected return on the market portfolio is 6%. A certain stock has a beta of 1.0. You believe that over the next year this stock will produce a return of 11%. Would you say that the stock is overpriced or underpriced? According to CAPM, the return that the stock should earn is %. (Enter as a percentage and round to one decimal place.)

You are analyzing a stock that has a beta of 1.19. The risk-free rate is 4.4% and you estimate the market risk premium to be 6.6%. If you expect the stock to have a return of 9.8% over the next year, should you buy it? Why or why not? The expected return according to the CAPM is%. (Round to two decimal places.) Should you buy the stock? (Select the best choice below.) O A. Yes, because the expected return based on the beta is equal to or less than the return on the stock. O B. No, because the expected return based on the beta is greater than the return on the stock.

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Stock R has a beta of 2.5, Stock S has a beta of 0.65, the required return on an average stock is 14%, and the risk-free rate of return is 6%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places.   %

A stock has an expected return of 15.2 percent, the risk-free rate is 3.4 percent, and the market risk premium is 9.3 percent. What must the beta of this stock be? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Suppose you inherit $100,000 at age 25 and immediately invested in a growth fund who’s annual rate of return average is 13%. Five years later, you transfer all proceeds from the scrubs fun into a long-term IRA that pays an average annual rate of 8%. Immediately you start making additional contributions of $7000 per year to the same IRA. Assuming continuous interest, steady interest rates, and a perfect record of making annualcontributions, how much is this IRA worth when you reach the age of 65? The formula that will need to be used is A = P e^r*t + D/r (e^r*t - 1). Hint: use the continuous interest formula to find the accumulated amount for the first five years, which is then the annual investment, P, into the IRA. 

If the interest rate on T Bills is 2% and the market risk premium is 6%, what is the CAPM-implied expected return on a stock with a beta of 1.25? Enter your answer as a percentage rounded to 2 decimal places.

What would the effect of the failure in the ratio measurement?

Suppose the risk-free return is 4.5% and the market portfolio has an expected return of 10.3% and a standard deviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.77. What is its expected return? The expected return is %. (Round to two decimal places.)

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.)