Beale Manufacturing Company has a beta of 1.9, and Foley Industries has a beta of 0.3. The required return on an index fund that holds the entire stock market is 12.5%. The risk-free rate of interest is 7%. By how much does Beale's required return exceed Foley's required return? Round your answer to two decimal places.

Beale Manufacturing Company has a beta of 1.9, and Foley Industries has a beta of 0.3. The required return on an index fund that holds the entire stock market is 12.5%. The risk-free rate of interest is 7%. By how much does Beale's required return exceed Foley's required return? Round your answer to two decimal places.

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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The market price of a security is $50. Its expected rate of return is 10%. The risk-free rate is 5%, and the market risk premium is 8%. What will the market price of the security be if its beta doubles (and all other variables remain unchanged)? Assume the stock is expected to pay a constant dividend in perpetuity. (Round your answer to 2 decimal places.)
Suppose rRF = 6%, rM = 12%, and bi = 1.1. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. 2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. 1. Now assume that rRF remains at 6%, but rM increases to 13%.…
Beale Manufacturing Company has a beta of 1, and Foley Industries has a beta of 0.65. The required return on an index fund that holds the entire stock market is 10.5%. The risk-free rate of interest is 5.75%. By how much does Beale's required return exceed Foley's required return? Do not round intermediate calculations. Round your answer to two decimal places.
The expected rate of return for the stock of Cornhusker Enterprises is 15 percent, with a standard deviation of 5 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 2 percen a. Which stock would you consider to be riskier? Round your answers to two decimal places. The coefficient of variation of returns for Cornhusker's stock: The coefficient of variation of returns for Mustang's stock: ✓is riskier. -Select- b. If you knew that the beta coefficient of Cornhusker stock is 0.9 and the beta of Mustang is 0.6, how would your answer to Part a change? Looking only at systematic risk -Select- ✓is riskier.
Jersey Jewel Mining has a beta coefficient of 1.1. Currently the risk-free rate is 2 percent and the anticipated return on the market is 8 percent. JJM pays a $5.40 dividend that is growing at 4 percent annually. Do not round intermediate calculations. a. What is the required return for JJM? Round your answer to two decimal places. % b. Given the required return, what is the value of the stock? Round your answer to the nearest cent. $ c. If the stock is selling for $138, what should you do? The stock -Select- overvalued and -Select- ✓ be purchased. d. If the beta coefficient declines to 0.9, what is the new value of the stock? Round your answer to the nearest cent. $ e. If the price remains $138, what course of action should you take given the valuation in d? The stock is -Select- and -Select- ✓ be purchased.
Jersey Jewel Mining has a beta coefficient of 1.3. Currently the risk-free rate is 2 percent and the anticipated return on the market is 8 percent. JJM pays a $5.30 dividend that is growing at 6 percent annually. Do not round intermediate calculations. What is the required return for JJM? Round your answer to two decimal places. % Given the required return, what is the value of the stock? Round your answer to the nearest cent. $ If the stock is selling for $166, what should you do? The stock -Select-isis notItem 3 overvalued and -Select-shouldshould notItem 4 be purchased. If the beta coefficient declines to 1.2, what is the new value of the stock? Round your answer to the nearest cent. $ If the price remains $166, what course of action should you take given the valuation in d? The stock is -Select-overvaluedundervaluedItem 6 and -Select-shouldshould notItem 7 be purchased.
Beale Manufacturing Company has a beta of 1.1, and Foley Industries has a beta of 0.20. The required return on an index fund that holds the entire stock market is 14%. The risk-free rate of interest is 2.5%. By how much does Beale's required return exceed Foley's required return? Do not round intermediate calculations. Round your answer to two decimal places. %
Beale Manufacturing Company has a beta of 1.3, and Foley Industries has a beta of 0.80. The required return on an index fund that holds the entire stock market is 9%. The risk-free rate of interest is 3.5%. By how much does Beale's required return exceed Foley's required return? Do not round intermediate calculations. Round your answer to two decimal places.
Suppose TRF = 4%, TM = 9%, and b = 1.1. a. What is n, the required rate of return on Stock i? Round your answer to one decimal place. % b. 1. Now suppose rar increases to 5%. The slope of the SML remains constant. How would this affect ry and n? I. ry will increase by 1 percentage point and n will remain the same. II. Both ry and r, will decrease by 1 percentage point. III. Both rm and r, will remain the same.. IV. Both r and r, will increase by 1 percentage point. V. r will remain the same and r, will increase by 1 percentage point. -Select- v 2. Now suppose rar decreases to 3%. The slope of the SML remains constant. How would this affect ry and n? I. TM will decrease by 1 percentage point and n will remain the same. II. rs will remain the same and n will decrease by 1 percentage point. III. Both ry and r, will increase by 1 percentage point. IV. Both ry and r, will remain the same. V. Both ry and r, will decrease by 1 percentage point. Select
YNA is expected to pay a dividend of $1.0 in Year 1 and $1.2 in Year 2. Analysts expect the price of YNA shares to be $19 two years from now. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. The beta of the stock is 1.2. Compute the intrinsic value of the stock. Round your answer to two decimal places and enter without the dollar sign.
According to the CAPM, what is the expected return on a security given market risk premium of 13%, a stock beta of 1.77, and a risk free interest rate of 2%? Put the answer in decimal place.
EJH has a beta of 1.4, CSH has a beta of 0.4, and KMS has a beta of 1. If you put 26% of your money in EJH, 25% in CSH, and 49% in KMS, what is the beta of your portfolio? The beta of your portfolio is __ ? (Round to two decimal places.)

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