Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 10, Problem 10QAP
Calculating Real Returns and Risk Premiums In Problem 9, suppose the average inflation rate over this period was 3.6 percent and the average T-bill rate over the period was 4.1 percent.
a. What was the average real return on the company’s stock?
b. What was the average nominal risk premium on the company’s stock?
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Students have asked these similar questions
1. Risk free rate represents:
a. The market rate of return
b. The rate provided by long term government securities
c. Beta
d. The rate provided by short term government securities
2. The market risk premium is measured by:
a. T-bill rate.
b. market return less risk-free rate.
c. beta.
d. standard deviation.
3. A stock with a beta of one would be expected to have a rate of return equal to
a. the market risk premium
b. the risk-free rate
c. the market rate of return
d. zero
What is the standard deviation of the returns on a stock given the following information? Could you please show the work?
State of Economy
Probability of state of Economy
Rate of return if state occurs
Boom
0.3000
0.1500
Normal
0.6500
0.1200
Recession
0.0500
0.0600
Average
0.3333
0.1100
You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities?
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Stock A
Stock B
Normal
.75
.13
.16
Recession
.25
−.05
−.21
Chapter 10 Solutions
Corporate Finance
Ch. 10 - Investment Selection Given that Madrigal...Ch. 10 - Investment Selection Given that Sears was down by...Ch. 10 - Risk and Return We have seen that over long...Ch. 10 - Prob. 4CQCh. 10 - Effects of Inflation Look at Table 10.1 and Figure...Ch. 10 - Risk Premiums Is it possible for the risk premium...Ch. 10 - Prob. 7CQCh. 10 - Returns Two years ago, the Lake Minerals and Small...Ch. 10 - Prob. 9CQCh. 10 - Historical Returns The historical asset class...
Ch. 10 - Prob. 1QAPCh. 10 - Calculating Yields In Problem 1, what was the...Ch. 10 - Calculating Returns Rework Problems 1 and 2...Ch. 10 - Prob. 4QAPCh. 10 - Prob. 5QAPCh. 10 - Prob. 6QAPCh. 10 - Prob. 7QAPCh. 10 - Prob. 8QAPCh. 10 - Prob. 9QAPCh. 10 - Calculating Real Returns and Risk Premiums In...Ch. 10 - Prob. 11QAPCh. 10 - Prob. 12QAPCh. 10 - Prob. 13QAPCh. 10 - Prob. 14QAPCh. 10 - Calculating Returns You bought a stock three...Ch. 10 - Prob. 16QAPCh. 10 - Prob. 17QAPCh. 10 - Prob. 18QAPCh. 10 - Prob. 19QAPCh. 10 - Prob. 20QAPCh. 10 - Prob. 21QAPCh. 10 - Prob. 22QAPCh. 10 - Prob. 23QAPCh. 10 - Using Return Distributions Suppose the returns on...Ch. 10 - Prob. 25QAPCh. 10 - Prob. 26QAPCh. 10 - Using Probability Distributions Suppose the...Ch. 10 - Prob. 28QAPCh. 10 - Prob. 1MCCh. 10 - Prob. 2MCCh. 10 - Assume you decide you should invest at least part...Ch. 10 - Prob. 4MCCh. 10 - Prob. 5MCCh. 10 - What portfolio allocation would you choose? Why?...
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