You expect the risk-free rate to be 4 percent and the market return to be 10 percent. You also have the following information about three stocks. Current Expected Expected Stock Beta Price Price Dividend U 1.5 $10 $11.50 $1.00 N 1.1 $27 $30 $0.00 Ο 0.8 $35 $36 $1.50

You expect the risk-free rate to be 4 percent and the market return to be 10 percent. You also have the following information about three stocks. Current Expected Expected Stock Beta Price Price Dividend U 1.5 $10 $11.50 $1.00 N 1.1 $27 $30 $0.00 Ο 0.8 $35 $36 $1.50

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P: You have observed the following returns over time: Assume that the risk-free rate is 6% and the...

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Question

You expect the risk-free rate to be 4 percent and the market return to be
10 percent. You also have the following information about three stocks.
Current Expected Expected
Stock Beta
Price Price
Dividend
U 1.5 $10
$11.50 $1.00
N
1.1 $27
$30
$0.00
Ο 0.8 $35
$36
$1.50
(Question 2 of 2) What is the required rate of return (based on the
CAPM) for an equally weighted portfolio of the three stocks? (Enter your
answer as a percentage, i.e., "10.25" for 10.25 percent

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