You own $23,868 of Denny's Corp stock that has a beta of 3.05. You also own $35,100 of Qwest Communications (beta = 1.64) and $11,232 of Southwest Airlines (beta = 1.08). Assume that the market return will be 15.0 percent and the risk-free rate is 7.0 percent. What is the market risk premium? Market risk premium What is the risk premium of each stock? (Round your answers to 2 decimal places.) Denny's risk premium Qwest's risk premium Southwest Airline's risk premium % Portfolio risk premium % % % What is the risk premium of the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 26P
icon
Related questions
Question

Kk.230.

 

Problem 10-25 Risk Premiums (LG10-3)
You own $23,868 of Denny's Corp stock that has a beta of 3.05. You also own $35,100 of Qwest Communications (beta = 1,64) and
$11,232 of Southwest Airlines (beta = 1.08). Assume that the market return will be 15.0 percent and the risk-free rate is 7.0 percent.
What is the market risk premium?
Market risk premium
What is the risk premium of each stock? (Round your answers to 2 decimal places.)
Denny's risk premium
Qwest's risk premium
Southwest Airline's risk premium
%
Portfolio risk premium
%
%
What is the risk premium of the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Transcribed Image Text:Problem 10-25 Risk Premiums (LG10-3) You own $23,868 of Denny's Corp stock that has a beta of 3.05. You also own $35,100 of Qwest Communications (beta = 1,64) and $11,232 of Southwest Airlines (beta = 1.08). Assume that the market return will be 15.0 percent and the risk-free rate is 7.0 percent. What is the market risk premium? Market risk premium What is the risk premium of each stock? (Round your answers to 2 decimal places.) Denny's risk premium Qwest's risk premium Southwest Airline's risk premium % Portfolio risk premium % % What is the risk premium of the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Investment in Stocks
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT