An antitrust case has lead to you having to calculate a fair return (using the CAPM) for RadioEthiopea common stock. The market has a volatility of 18.00%, while the shares have a volatility of 33.00%. The correlation between the two sets of returns is -0.10. The risk free rate is 1.90%, while the expected return on the market is 4.30%. What is the fair return for RadioEthiopea common stock? 1.11% 1.77% 1.46% 1.66%
An antitrust case has lead to you having to calculate a fair return (using the CAPM) for RadioEthiopea common stock. The market has a volatility of 18.00%, while the shares have a volatility of 33.00%. The correlation between the two sets of returns is -0.10. The risk free rate is 1.90%, while the expected return on the market is 4.30%. What is the fair return for RadioEthiopea common stock? 1.11% 1.77% 1.46% 1.66%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
An antitrust case has lead to you having to calculate a fair return (using the
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1.11% |
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1.77% |
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1.46% |
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1.66% |
Expert Solution
Step 1
Given:
Market volatility =18%
Share volatility = 33%
Correlation = -0.10
Risk free rate =1.90%
Expected market return =4.30%
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