According to MSN money, the stock of Orange Corporation has a beta of 1.5, but according to Yahoo Finance it is 1.75. The expected rate of return on the market is 12% and the risk free rate is 2%. What is the difference between the required rates of return calculated using each of these betas?

Q: These fact relate to Cornerstone Unlimited.   The risk-free rate of return is 5 percent and the…

A: RISK FREE RATE = 5% MARKET RISK PREMIUM = 12% BETA = 1.40 MARKET RISK PREMIUM = (MARKET RETURN -…

Q: Suppose that Company ABC has a beta of .92.  The expected return on the market is 13% and the market…

A: Market return (Rm) = 0.13Market risk premium (Mp) = 0.102Beta of the stock (b) = 0.92Expected return…

Q: expected

A: Introduction: Capital asset pricing model or CAPM as it is known widely is a tool which helps in…

Q: have been asked to calculate the required return for a stock that you are considering investing in.…

A: Required rate is the rate expected from the security based on the risk involved in the security that…

Q: a. Given the following holding-period returns, compute the average returns and the standard…

A: Here, MonthS CorpMarket12%1%2-1%2%3-1%2%41%1%56%5%66%1%

Q: Your boss asks you to compute the cost of equity for ABC Corp. using the capital asset pricing model…

A: Stock beta=1.30Risk free rate=3%Market risk premium(Rm-Rf)=5.7%

Q: Moerdyk Company's stock has a beta of 1.5, the risk - free rate (rRFR) is 4%, and the market risk…

A: The objective of the question is to calculate the required rate of return for Moerdyk Company's…

Q: Suppose Pepsi Co. has a beta of 0.7, whereas the beta of Microsoft is 1.1. The risk free interest…

A: In this question we need to find expected return of Pepsi Co. and Microsoft According to CAPM.…

Q: AA Corporation's stock has a beta of 0.8. The risk-free rate is 2%, and the expected return on the…

A: The required rate of return measure of the profitability of an investment and is used to evaluate…

Q: Zacher Co.'s stock has a beta of 0.82, the risk-free rate is 4.25%, and the market risk premium is…

A: Required rate of return = Risk free rate + beta * market risk premium

Q: jerilu markets has a beta of 1.23 the risk free rate of return is 2.10 percent and the market rate…

A: Step 1 The investment return that an asset is anticipated to generate over and above the risk-free…

Q: The stock in Bowie Enterprises has a beta of 1.10. The expected return on the market is 12.40…

A: Beta of stock = 1.10 Market return = 12.40% Risk free rate = 3.21%

Q: Use Worksheet 5.2 and Exhibit 5.6. Emma Sanchez is currently renting an apartment for $575 per month…

A: There is no direct answer about whether renting or owning a property is preferable. The decision is…

Q: erilu Markets has a beta of 1.46. The risk-free rate of return is 2.98 percent and the market rate…

A: Risk premium = Beta(market return - risk free rate)

Q: Barry wishes to compute the beta of a stock that has a correlation of 0.64 with the market. The…

A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…

Q: What is the required rate of return on AA's stock?

A: Required rate of return (RRR) is the least required rate at which an investor will agree to invest…

Q: The S&P500 has an expected return of 15.8%. The riskless rate is 2.7% and XYZ's beta is 1.3. What…

A: In the following question we are required to calculate the expected return on XYZ stock according to…

Q: Walmart's beta is 0.7. The market risk premium is 4.2 %. The appropriate risk-free rate is 0.04 %.…

A: Given information: Beta : 0.7 Market risk premium : 4.2% Risk free rate : 0.04%

Q: what is the stock's predicted return

A: Market return is 10%return on the SMB portfolio (rSMB) is 2.0 return on the HML portfolio (rHML) is…

Q: JaiLai Cos. stock has a beta of 0.8, the current risk-free rate is 6.2 percent, and the expected…

A: The provided information are: Beta = 0.80 Expected return = 12% Risk free rate = 6.2%

Q: Netflix, Inc. has a beta of 3.61. If the market return is expected to be 13 percent and the…

A: Market return is expected = 13% The risk-free rate = 3%

Q: The stock of BP, a flood insurance provider, has a marketed beta of .8. The risk free rate is 3%.…

A: As per CAPM, cost of equity = risk-free rate + Beta*(market risk premium) risk-free rate = 3% Beta =…

Q: Alpha Company has a beta of 3.25 and a standard deviation of returns of 27%. The return on the…

A: In this question we require to calculate the risk premium on the market and also required rate of…

Q: Suppose the market risk premium is 6% and the​ risk-free interest rate is 5% . Using the data in…

A: Given The risk free rate is 5%Market risk premium is 6%

Q: What is the required rate of return on AA's stock?

A: Required Rate of Return: It is the minimum rate acceptable by the investor for owning the stock of…

Q: (i) Potpuri Inc Stock has a beta of 1.7 and an expected return of 16.7% under CAPM. What is the…

A: Capital Asset Pricing Model (CAPM) is a financial approach that helps to determine the expected…

Q: Breckenridge, Inc., has a beta of 0.97. If the expected market return is 12.0 percent and the​…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: rice of Home Depot stock is trading for $325 per share. You believe the price is too high. If the…

A: When you trade in the stock market than purchase at right price is important because other wise you…

Q: You hear on the news that the S&P 500 was down 1.7% today relative to the risk-free rate (the…

A: Excess return of the market is -1.7% Excess return on stock is calculated as Excess return = Beta of…

Q: Cooley Company's stock has a beta of 0.8 , the risk-free rate is 1.04 %, and the market risk premium…

A: The Capital Asset Pricing Model (CAPM) refers to the model which tells us how the financial markets…

Q: The stock of Wiley United has a beta of 0.92. The market risk premium is 8.6% and the risk-free rate…

A: Given the following information: Beta: 0.92 Market risk premium: 8.6% Risk free rate: 2.2%

Q: Cooley Computer Repair and Service Company's stock has a beta of 1.28, the risk-free rate is 2.25%,…

A: According to capm approach required return is equal to risk free rate plus beta times market risk…

Q: A firm's stock has a beta of 1.7. The expected T-bill return is 3.7%. and the expected market return…

A: Risk-free rate(expected T-bill return) = 3.7%Beta = 1.7Expected market return = 7%

Q: According to the CAPM, what is the required rate of return for a stock with a beta of 0.7, when the…

A: To calculate the required rate of return we use the below formula   Required rate of return = Risk…

Q: The risk-free rate of return is 2.5%, the required rate of return on the market is 11.5%, and ABC…

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

Q: Walmart's beta is 0.7. The market risk premium is 4.2 %. The appropriate risk-free rate is 0.04 %.…

A: Given information: Beta : 0.7 Market risk premium : 4.2% Risk free rate : 0.04%

Q: Suppose intel stock has a beta of 0.80, whereas Boeing stock has a beta of 1.15. If the risk-free…

A: Intel Beta = ib = 0.89 Boeing Beta = bb = 1.15 Risk free rate = rf = 3.1% Market return = rm = 10.1%

Q: a. Compute the expected rate of return for Intel common​ stock, which has a 1.1 beta. The​ risk-free…

A: Cost of equity(Ke) is the return expected by the holders of common stock, they are paid an…

Q: Paycheck, Inc. has a beta of 1.33. If the market return is expected to be 12.70 percent and the…

A: Market return = 12.70%Risk-free rate = 7.70%Beta = 1.33

Q: What is the expected return on Verdoni’s stock?

A: The expected return is the return expected by the investors on their investment. It is the…

Q: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market…

A: Market return is 12% return on the SMB portfolio (rSMB) is 2.1%  return on the HML portfolio (rHML)…

Q: JaiLai Cos. stock has a beta of 0.7, the current risk-free rate is 6.1 percent, and the expected…

A: CAPM model provides formula that calculates the expected return on stock based on its level of risk.…

Q: Q1) UPS, a delivery services company, has a beta of 1.1, and Wal-Mart has a beta of 0.7. The…

A: Note: It is a case where no question is specified to solve among the multiple questions posted, so…

Q: Mulherin's stock has a beta of 1.34, its required return is 8.33%, and the risk-free rate is 2.30%.…

A: Beta = b = 1.34Required Return = r = 8.33%Risk free rate = rf = 2.30%

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.