Assume the risk-free rate is 8% and the expected rate of return on the market 16%. A share of stock is now selling for $75. It will pay a dividend of $5 per share at the end of the year. If the stock’s beta is 0.80, what must investors expect the stock to sell for at the end of the year? A stock has a beta of 1.05 and an expected return of 11.3%. A risk-less asset is currently earning 3.5%. What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? If a portfolio of the two assets has an expected return of 10.2%, what is its beta? If a portfolio of the two assets has a beta of 2.14, what are the portfolio weights? How do you interpret the weights for the two assets in this case?

Assume the risk-free rate is 8% and the expected rate of return on the market 16%. A share of stock is now selling for $75. It will pay a dividend of $5 per share at the end of the year. If the stock’s beta is 0.80, what must investors expect the stock to sell for at the end of the year? A stock has a beta of 1.05 and an expected return of 11.3%. A risk-less asset is currently earning 3.5%. What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? If a portfolio of the two assets has an expected return of 10.2%, what is its beta? If a portfolio of the two assets has a beta of 2.14, what are the portfolio weights? How do you interpret the weights for the two assets in this case?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate, g, throughout time. The stock’s required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL?
You are thinking of buying a stock priced at $106 per share. Assume that the risk-free rate is about 5.1% and the market risk premium is 6.4%. If you think the stock will rise to $115 per share by the end of the year, at which time it will pay a $2.59 dividend, what beta would it need to have for this expectation to be consistent with the CAPM?
← You are thinking of buying a stock priced at $109.31 per share. Assume that the risk-free rate is about 4.03% and the market risk premium is 6.48%. If you think the stock will rise to $118.76 per share by the end of the year, at which time it will pay a $3.48 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is (Round to two decimal places.) ...
need help
Suppose that the risk-free rate is 3% and the expected return on the market portfolio is 6%. A certain stock has a beta of 1.0. You believe that over the next year this stock will produce a return of 11%. Would you say that the stock is overpriced or underpriced? According to CAPM, the return that the stock should earn is %. (Enter as a percentage and round to one decimal place.)
Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%.A share of stock sells for $50 today. It will pay a dividend of $6 per share at the end of the year. Its beta is 1.2. What do investors expect the stock to sell for at the end of the year?
A share of stock with a beta of 0.75 now sells for $50. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 4%, and the market risk premium is 7%. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? Please type answer no write by hend.
You are considering an investment in the common stock of Crisp's Cookware. The stock is expected to pay a dividend of $1.80 a share at the end of the year (D1=1.80). The stock has a beta of 0.9. The risk-free rate is 5.0%, and the market expected return is 9.5%. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $30 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years?
You are considering an investment in the common stock of Remi's Sporting Goods. The stock is expected to pay a dividend of $1.80 a share at the end of the year (D1=1.80). The stock has a beta of 0.8. The risk-free rate is 4.5%, and the market expected return is 8.0%. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $24 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years?
The market expects a stock to return 14.54% over the next year. The stock's beta is 0.84. If the risk-free is 1.87% and the market risk premium is 5.22%, what is the stock's alpha?
The risk-free rate is 4% and the expected market return is 10%. A stock with a beta of 0.9 is currently priced at $40 and will pay $1.40 dividend one year later. If then the stock will be priced at $42, is the stock underpriced or overpriced?
what is the expected return and should you buy it?