Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The firm's beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM ?
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- 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%arrow_forwardRemember the following the 1-factor model or CAPM is defined as re-rf beta * [rm -rf] what is the return on equity (re) if rf = 0.05 rm = 1.88 beta = 1.47arrow_forwardSuppose the beta of this value based company is 0.85, the risk-free rate is 2 percent, and the expected market rate of return is 10 percent. Calculate the expected rate of return. The answer is closest to: Group of answer choices 10.5 percent 13.1 percent 6.5 percent 9.0 percentarrow_forward
- What is the expected return on asset A if it has a beta of 0.5, the expected market return is 13%, and the risk-free rate is 3%? O 6.5% 8% 9.5% 7% O 5%arrow_forwardPlease see the attached diagram image. Please show how to solve this problem and please show all steps and formulas in Excel. Based on the Capital Asset Pricing Model (CAPM) and the diagram below, what is the return of the stock if its beta is 1.2 or 0.8?arrow_forwardCooley Company's stock has a beta of 1.05, the risk-free rate is 2%, and the market risk premium is 4%. What is the firm's required rate of return?arrow_forward
- Consider a firm with a beta of 1.57. If the market return is 6.73% and the risk-free rate is 0.90%, what is the firm's expected return according to the capital asset pricing model? Round your answer to four decimal places, e.g., enter 12.34 for 12.34%.arrow_forwardSuppose the market risk premium is 6.8% and the risk-free interest rate is 4.5%. Calculate the cost of capital of investing in a project with a beta of 1.4.arrow_forwardIf the beta of Asset A is 2.2, the risk free rate is 2.5%, and the expected return on Asset A is 8%, what is the expected return on the market (Note: you want to use CAPM)? Group of answer choices 7.28% 5.00% 8.00% 16.80%arrow_forward
- A financial analyst for the ZZZ Corporation uses the Security Market line to estimate the cost of equity, Re. The analyst observes the current risk-free interest rate, Rf, is 3%. The analyst estimates that ZZ has a beta of 2. If the analyst finds that RE is 13%, what does the analyst use as the value of [E(RM) – R¡]? -arrow_forwardXYZ has a beta coefficient of 1.76. Estimate its cost of equity if the risk-free rate is 8% and return on the broad market index is 16%. Calculate the cost of equity.arrow_forwardYou want to estimate the cost of equity of firm A using CAPM. Firm A has a beta of 1.3. Assume that the return on the market portfolio is 8.52%, and the risk-free rate is 3%. What is the cost of equity of firm A? Group of answer choices There is not enough information to answer this question. 10.17% 11.74% 14.21% 12.11%arrow_forward
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