Check ques ch 21

An investor is considering whether to invest in shares of Stock ABC or risk-free bonds. The stock pays dividends continuously at a rate of 1%, has an expected annual yield of 9%, and has a volatility of 24%. The continuously compounded risk-free rate is 1.8%. Assuming that prices for Stock ABC follow a lognormal distribution, calculate the probability that an investment of X in Stock ABC would be worth less than an investment of X in risk-free bonds after 5 years. [DM_05c_02] You Answered 0.3975 O 0.4353 O 0.4164 Correct Answer O 0.3785 0.3596

The rate of return on the market stock index is 13 percent. The rate of return on a risk-freebank account is 1%. The B (beta) of stock XYZ is 1.5. Use the data to answer the questionsbelow.a. What is the market risk premium? Show your work.b. What is the cost of equity for XYZ? Show your work.c. What is the stock XYZ risk premium? Show your work.d. Draw the graph of the Security Market Line and show the stock of XYZ on the graph.The end-of-year dividend on stock ABC is expected to be $0.8. The growth rate of dividend isexpected to be 5 percent for ever. The current price of the ABC stock is $10. Use the data toanswer the questions below.e. What is the cost of equity for stock ABC? Show your work.f. Suppose stock KLM has the same end-of-year dividend, dividend growth rate andprice as stock ABC, but the risk of KLM stock is much greater than of the ABC stock.What is your estimate of the cost of equity of stock KLM using the method at part e?Do you agree with the valuation of the cost of…

1. You estimate the Fama-French 3-factor model for the two stocks, A and B, and find the following coefficients. You also estimate risk premiums for each factor. Calculate the cost of equity capital (i.e., expected rate of return) for each company using the 3-factor APT model. The risk-free rate is 4%. Stock Mkt A B Risk premiums 1.1 1.0 5% SMB -1.2 -2.0 HML -1.0 -1.5 3%

Using the equity asset valuation model (CAPM) equation, determine the required return for the shares of the following companies, if the market return is 7.50% (Rm = 7.50%) and the risk-free asset return is 1.25% (RF = 1.25%). You must show all counts. Stock Beta SKT 0.65 COST 0.90 SU 1.42 AMZN 1.57 V 0.94

The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: REQUIRED RATE OF RETURN (Percent) 20.0 16.0 Return on HC's Stock X U 12.0 0.5 1.0 RISK (Beta) CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock 1.5 Value 2.0 (?)

d. What would the percentage rate of return be on this common stock investment? Compare this to the rate of return on the warrant computed when the common stock was selling for $55 per share. Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Percentage return on stock Percentage return on warrants % %

a)The equity shares of Cyberdyne Plc have a beta value of 0.90. The risk-free rate of return is 5% and the market risk premium is 3%. Corporation tax is 19%. .Calculate the required rate of return on the shares of Cyberdyne Plc and explain the impact of beta on the shares of the company. b) Outline five benefits/advantages that a Stock Exchange listing could offer a company. c) Calculate the Yield to Maturity (YTM) of a £100 nominal value irredeemable bond with a coupon rate of 7% and a market value of £105. d) A 10-year corporate bond has 6 years remaining until redemption. The par value is £100and it pays a 4% coupon on an annual basis. The yield to maturity is 8%. Using the above information, calculate the market price of the bond.

1. The percentage measure of how well an investment is doing and is often used as the basis for comparison with other investments is the _____. A. dividend yield B. price-earning ratio     C. return on equity D. return on investment   2. Ricardo invested a lump sum of $11,500 in a mutual fund with an offer price of $12.33. How many shares did he purchase? (Round to the nearest thousandth.) A. 839.206 B. 932.685     C. 1,073.401 D. 1,352.035

Assume the following data for a stock: Risk - free rate market) == 1.5; beta (size) = 0.3; beta (book-to-market) = 5 percent; beta ( = - 1.1; market risk premium 1 7 percent; size risk premium 3.7 percent; and book - to - market risk premium = 5.2 percent. Calculate the expected return on the stock using the Fama - French three-factor model.

can you do the question b please

Sections C through F please

The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: REQUIRED RATE OF RETURN (Percent) 20.0 16.0 12.0 1,8 Return on HC's Stock 8.0 4.0 0 0 0.5 1.0 1.5 2.0 RISK (Beta) CAPM Elements Risk-free rate (RF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock Value An analyst believes that inflation is going to increase by 3.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.'s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst's prediction. Happy Corp.'s new required rate of return is

Nero Violins has the following capital structure: Security Beta Total Market Value ($ millions) Debt 0 $ 102 Preferred stock 0.22 42 Common stock 1.22 301 What is the firm's asset beta? (Hint: What is the beta of a portfolio of all the firm's securities?) Note: Do not round intermediate calculations. Round your answer to 3 decimal places. Assume that the CAPM is correct. What discount rate should Nero set for investments that expand the scale of its operations without changing its asset beta? Assume a risk-free interest rate of 7% and a market risk premium of 8%. Ignore taxes. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

a) The equity shares of Cyberdyne Plc have a beta value of 0.90. The risk-free rate of return is 5% and the market risk premium is 3%. Corporation tax is 19%.Calculate the required rate of return on the shares of Cyberdyne Plc and explain the impact of beta on the shares of the company. b) Outline five benefits/advantages that a Stock Exchange listing could offer a company. c) Calculate the Yield to Maturity (YTM) of a £100 nominal value irredeemable bond with a coupon rate of 7% and a market value of £105. d) A 10-year corporate bond has 6 years remaining until redemption. The par value is £100 and it pays a 4% coupon on an annual basis. The yield to maturity is 8%.Using the above information, calculate the market price of the bond.

Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $2.40 and it expects dividends to grow at a constant rate gL = 5.8%. The firm's current common stock price, P0, is $21.00. The current risk-free rate, rRF, = 4.8%; the market risk premium, RPM, = 6.1%, and the firm's stock has a current beta, b, = 1.2. Assume that the firm's cost of debt, rd, is 10.57%. The firm uses a 4.1% risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach. What is the firm's cost of equity using each of these three approaches? Do not round intermediate calculations. Round your answers to two decimal places. CAPM cost of equity:    % Bond-Yield-Plus-Risk-Premium:    % DCF cost of equity:    % If you are equally confident of all three methods, then what is the best estimate of the firm’s cost of…

The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows:   00.51.01.52.020.016.012.08.04.00REQUIRED RATE OF RETURN (Percent)RISK (Beta)Return on HC's Stock   CAPM Elements Value Risk-free rate (rRFrRF)      Market risk premium (RPMRPM)      Happy Corp. stock’s beta      Required rate of return on Happy Corp. stock        An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.’s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst’s prediction. Happy Corp.’s new required rate of return is    .   Tool tip: Mouse over the points on…