Adequate information: Expected return on the stock ER S = 0.109 Expected market return ER M = 0.118 Beta of the stock β = 0.90 To compute: Risk-free rate Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

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Chapter 11, Problem 15QAP

Summary Introduction

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

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A stock has an expected return of 13.5 percent, its beta is 1.16, and the expected return on the market is 12.5 percent. What must the risk-free rate be?

How do you find the market risk premium and market expected return given the expected return of stock, beta, and risk free rate? Example: The expected return of a stock with a beta of 1.2 is 16.2%. Calculate the market risk premium and the market expected return, given a risk-free rate of 3%.

*Stock A has a beta of 1.3 and an expected return of 10.2. Stock B has a beta of 0.8 and an expected return of 8.7. If these stocks are priced correctly according to the CAPM, what is the risk-free rate? Give your answer in percentage to the nearest basis point.

Answer 2

Question

Chapter 11, Problem 15QAP

Summary Introduction

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 11, Problem 15QAP

Summary Introduction

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 11, Problem 15QAP

Summary Introduction

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 11, Problem 15QAP

Summary Introduction

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Answer 6

Chapter 11, Problem 15QAP

Summary Introduction

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Answer 7

Chapter 11, Problem 15QAP

Summary Introduction

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Answer 8

Expert Solution & Answer

Answer 9

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Answer 10

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Answer 11

Ch. 11 - Diversifiable and Nondiversifiable Risks In broad...Ch. 11 - Systematic versus Unsystematic Risk Classify the...Ch. 11 - Expected Portfolio Returns If a portfolio has a...Ch. 11 - Diversification True or false: The most important...Ch. 11 - Portfolio Risk If a portfolio has a positive...Ch. 11 - Beta and CAPM Is it possible that a risky asset...Ch. 11 - Covariance Briefly explain why the covariance of a...Ch. 11 - Prob. 8CQ Ch. 11 - Prob. 9CQ Ch. 11 - Prob. 10CQ

Adequate information: Expected return on the stock ER S = 0.109 Expected market return ER M = 0.118 Beta of the stock β = 0.90 To compute: Risk-free rate Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Solution Summary: The author explains that the risk-free rate refers to the return that is anticipated on the investment with zero risk.

Videos

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Want to see the full answer?

Chapter 11 Solutions

Adequate information: Expected return on the stock ER S = 0.109 Expected market return ER M = 0.118 Beta of the stock β = 0.90 To compute: Risk-free rate Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Solution Summary: The author explains that the risk-free rate refers to the return that is anticipated on the investment with zero risk.

Videos

Adequate information: Expected return on the stock ERS = 0.109 Expected market return ERM = 0.118 Beta of the stock β = 0.90 To compute: Risk-free rate Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.

Want to see the full answer?

Chapter 11 Solutions

Adequate information:

Expected return on the stock ERS = 0.109

Expected market return ERM = 0.118

Beta of the stock β = 0.90

To compute: Risk-free rate

Introduction: Risk-free rate refers to the return that is anticipated on the investment with zero risk.