Answered: A stock has a beta of 86 and an…

A stock has a beta of 86 and an expected return of 9.14 percent. If the stock's reward-to-risk ratio is 6.08 percent, what is the risk-free rate?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

See similar textbooks

Related questions

Q: Stock R has a beta of 2.0, Stock S has a beta of 0.45, the requiredreturn on an average stock is…

A: Calculation of difference between riskier stock and less risky stock: Answer: The difference between…

Q: Assume that the risk-free rate is 5% and market risk premium is 6%. What is the expected return for…

A: Required rate of return is the percentage of profit required from an investment. Formulas: Required…

Q: The risk-free rate of return is 5.8 percent and the market risk premium is 13 percent. What is the…

A: To calculate the expected rate of return on a stock we will use the below CAPM formula Expected…

Q: A stock has an expected return of 11 percent, its beta is 95, and the risk-free rate is 6 percent.…

A: We need to use CAPM to calculate expected rate of return. The equation is Ri=Rf + Beta(Rm-Rf) Where…

Q: A stock has an expected return of 7.72 percent, the risk-free rate is 2.9 percent, and the market…

A: We can calculate Beta by using the CAPM model as it helps in showing the relationship between the…

Q: A stock has a beta of 1.15, the expected return on the market is 11% and risk free rate is 3%. What…

A: According to Capital asset pricing model ( CAPM),Re = Rf +[ beta × ( Rm - Rf)]Where,Re = expected…

Q: Stock A has a beta of 1.30, and its required return is 13.25%. Stock B's beta is 0.90. If the…

A: Given Beta of Stock A = 1.30 Risk free Rate = 4.75% Required return of stock A = 13.25%

Q: A stock has a required return of 10%; the risk- free rate is 3.5%, and the market risk premium is…

A: The Capital Asset Pricing Model (CAPM) is the model which shows the relationship between the…

Q: Assume that the risk-free rate is 2.8 percent, and that the market risk premium is 4.8 percent. If a…

A: Required rate of return = 16.1%Risk-free rate = 2.8%Market risk premium = 4.8%

Q: A stock has a beta of 1.05, the expected return on the market is 10.2 percent, and the risk-free…

A: Expected return on the market = 10.2%Beta = 1.05Risk-free rate = 5.4%

Q: Stock A's stock has a beta of 1.30, and its required return is 13.75%. Stock B's beta is 0.80. If…

A: Stock A beta = 1.30 Required return = 13.75% Risk free rate = 2.75% As per formula…

Q: A stock has an expected return of 10.9 percent, the risk-free rate is 3.1 percent, and the market…

A: Capital Asset Pricing Model (CAPM) is used to determine the required return on a stock which is the…

Question

A stock has a beta of 86 and an expected return of 9.14 percent. If the stock's reward-to-risk ratio is 6.08 percent, what is the risk-free rate?
Multiple Choice
3.91%
O 3.42%
O
3.61%
1.36%
3.76%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:

VIEW

Step 2: Computation of risk free rate:

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

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

A stock has a beta of 1.17 and an expected return of 11.21 percent. If the risk-free rate is 3.2 percent, what is the stock's reward-to-risk ratio? Multiple Choice 6.32% 9.58% О 6.85% О 5.99% 8.21%
A stock has a beta of .86 and an expected return of 8.45 percent. If the risk-free rate is 2.2 percent, what is the stock's reward-to-risk ratio? Multiple Choice 6.71% 6.36% O 727% 8.55% 9.83%
A stock has a beta of .92 and an expected return of 8.57 percent. If the risk-free rate is 2.8 percent, what is the stock's reward-to-risk ratio? Multiple Choice 6.27% 7.79% 5.79% 5.49% 9.32%
Help Save & Exit Submit The risk-free rate is 4.2 percent and the market expected return is 11.1 percent. What is the expected return of a stock that has a beta of 1.27? Multiple Choice 15.63% 18.30% 19.82% 11.52% 12.96% ( Prev 29 of 40 Next >
A stock has a beta of .88 and an expected return of 8.49 percent. If the risk-free rate is 2.4 percent, what is the stock's reward-to-risk ratio? 9.65% O6.06% 8.28% 6.92% 6.39 %
Give me three steps solution and explanation
Stock A has a beta of 1.2, and its required rate of return is 11.00%. Stock B's beta is 0.80. If the risk-free rate is 4.50%, what is the required rate of return on Stock B? (Ch. 8) Group of answer choices 9.45% 7.07% 8.39% 8.83% 7.95%
Find the required rate of return on the market if: beta is 1.23, required return on the stock is 9.50%, and risk-free rate is 2.30% A. 9.87% B. 8.40% C. 8.15% D. 8.72% E. 8.32%
A stock has a beta of 1.3, the expected return on the market is 11 percent, and the risk-free rate is 7.15 percent. What must the expected return on this stock be? Multiple Choice 11.55% 12.76% 21.45% 12.64% 12.16%
A stock has an expected return of 12.69 percent and its reward-to-risk ratio is 7.6 percent. If the risk-free rate is 3.25 percent, what is the stock's beta? Show Transcribed Text O O 1.46 1.25 1.12 1.40 1.68
Stock A's stock has a beta of 1.30, and its required return is 13.75%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Select the correct answer. a. 10.26% b. 10.32% c. 10.29% d. 10.35% e. 10.38%
Stock Z has a beta of 1.4, and its required rate of return is 10.00%. Stock B's beta is 0.80. If the risk-free rate is 4.00%, what is the required rate of return on Stock B? Group of answer choices 7.43% 7.06% 5.94% 7.95% 6.69%