Suppose the common stock of United Industries has a beta of 1.09 and an expected return of 13.9 percent. The risk-free rate of return is 3.2 percent while the inflation rate is 2.2 percent. What is the expected market risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Consider the following multifactor (APT) model of security returns for a particular stock. Factor Risk Premium 8% 9 7 Factor Inflation Industrial production Oil prices Factor Beta 1.1 0.6 0.3 a. If T-bills currently offer a 7% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) X Answer is complete but not entirely correct. Expected rate of return 19.0 X %

Assume that the risk-free rate is 6.5% and the market risk premium is 8%. What is the required return for the overall stock market? Round your answer to one decimal place.   % What is the required rate of return on a stock with a beta of 0.6? Round your answer to one decimal place.   %

Consider the following information on Stocks I and II: Probability of State of Economy State of Economy Rate of Return if State Occurs Stock I Stock II Recession .22 .045 -.37 Normal .62 .355 .29 Irrational .16 exuberance .215 .47 The market risk premium is 11.7 percent, and the risk-free rate is 4.7 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock 1.94 % %

suppose the common stock of United Industries has a beta of 1.19 and an expected return of 11.8 percent. The risk-free rate of return is 3.5 percent while the inflation rate is 2.6 percent. What is the expected market risk premium? round to 2 decimal places,

Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.70 0.180 Repete Co. 1.39 0.153 What is the risk - free rate? (Do not round intermediate calculations. Round the final answer to 3 decimal places.) Risk - free rate % Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Expected Return on Market Pete Corp. % Repete Co. %

Stock A has an expected return of 13.52 percent. Stock B has an expected return of 9.24 percent. Assuming the Capital Asset Pricing Model holds, and Stock A's beta is greater than Stock B's beta by 0.32, what is the expected market risk premium (in percent)? Answer to two decimals

Which of the following statements is CORRECT? (Assume that the risk-free rate is a constant.) a. The effect of a change in the market risk premium depends on the slope of the yield curve. b. If the market risk premium increases by 1%, then the required return on all stocks will rise by 1%. c. If the market risk premium increases by 1%, then the required return will increase by 1% for a stock that has a beta of 1.0. d. The effect of a change in the market risk premium depends on the level of the risk-free rate. e. If the market risk premium increases by 1%, then the required return will increase for stocks that have a beta greater than 1.0, but it will decrease for stocks that have a beta less than 1.0.

Suppose that the Treasury bill rate is 6% rather than 3%, as we assumed in Table 12.1, and the expected return on the market is 9%. Use the betas in that table to answer the following questions. a. When you assume this higher risk-free interest rate, what makes sense for how you should modify your assumption about the rate of return on the market portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) b. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. Suppose now that you continued to assume that the expected return on the market remained at 9%. Now what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)d. Ford offer a higher or lower expected return if the interest rate is 6% rather than 3%? e. Walmart offer a higher or…

The beta of M Simon Inc., stock is 1.6, whereas the risk-free rate of return  is 0.06. If the expected return on the market is 0.15, then what is  the expected return on M Simon Inc? Round to four decimal places.