Suppose the market risk premium is 6% and the​ risk-free interest rate is 5% . Using the data in the​ table, calculate the expected return of investing in a. ​Starbucks' stock. b.​ Hershey's stock. c.​ Autodesk's stock.

The following table shows betas for several companies. Calculate each stock's expected rate of return using the CAPM. Assume the risk-free rate of interest is 4%. Use a 7% risk premium for the market portfolio. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Company. Caterpillar Apple Johnson & Johnson Consolidated Edison Beta 0.98 1.35 0.69 0.13 Cost of Capital % % %

Finance The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Arethese stocks correctly priced? Why or why not? Use E(Ri) = Rf + βi(E(RM) − Rf).

The risk-free rate is 3%, the market risk premium (MRP) is 8%, and the Beta of Lotsa Dough common stock is 0.9.  What is LotsaDough's cost of common equity using the SML/CAPM approach? Group of answer choices 7.5% 10.2% 13.7% 15.1%

Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows:   Stock Expected Return Standard Deviation A   11 %   35 % B   20 %   65 % Correlation = –1               a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be substituted for the risk-free asset?) (Round your answer to 2 decimal places.)   b. Could the equilibrium rƒ be greater than 14.15%?multiple choice Yes No

Assume that the risk-free rate is 6.4% and the market return is 8%. Calculate the expected rate of return of a stock with a volatility (beta) of 3%.

The following table shows betas for several companies. Calculate each stock's expected rate of return using the CAPM. Assume the risk-free rate of interest is 4%. Use a 6% risk premium for the market portfolio. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Company Caterpillar Apple Johnson & Johnson Consolidated Edison Beta 1.84 - 1.48 0.67 0.39 Cost of Capital % % % %

Consider a CAPM economy. The risk free rate (rf ) is 4% and the expected market return (rM )is 10%.  (a) Stock 1: β = 0.90. Compute the expected return of stock 1.  (b) Stock 2: β = 1.1. Compute the expected return of stock 2.  (c) Portfolio 1: The proportions invested in stock 1, stock 2, and risk free asset are 30%, 30%,and 40%, respectively. Compute the beta and expected return of portfolio 1.  (d) Portfolio 2: The proportions invested in stock 1, stock 2, and risk free asset are 50%, 60%,and -10%, respectively. Compute the beta and expected return of portfolio 2.

The payoff table below indicates the returns (in RM thousands) of investments in stock, bond and fixed deposit under different economic situations. Type of Investment Stock Bond Fixed Deposit Table 1 Economic Situation Good 150 50 45 Stable 60 40 45 Poor -30 36 45 The probabilities of good, stable and poor economy are 0.3, 0.5 and 0.2, respectively. What is the best investment based on the expected monetary value criterion? Draw a decision tree.

1. You estimate the Fama-French 3-factor model for the two stocks, A and B, and find the following coefficients. You also estimate risk premiums for each factor. Calculate the cost of equity capital (i.e., expected rate of return) for each company using the 3-factor APT model. The risk-free rate is 4%. Stock Mkt A B Risk premiums 1.1 1.0 5% SMB -1.2 -2.0 HML -1.0 -1.5 3%