Company A has a beta of 0.60, while Company B's beta is 1.70. The required return on the stock market is 9.00%, and the risk-free rate is 2.25%. What is the difference between A's and B's required rates of return? (Hint: First find the market risk premium, then find the required returns on the stocks.) Do not round your intermediatecalculations.a. 10.013%b. 9.900%○ c. 6.300%○ d. 7.425%○ e. 4.950%

Step 1: To calculate the required rate of return for Company A and Company B, you can use the…

Answered: Company A has a beta of 0.60, while…

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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Company A has a beta of 0.9 , while Company B's beta is 1.4 . The market risk premium is 13.78 %, and the risk-free rate is 4.25%. What is the difference between A's and B's required rates of return? (Hint: find the required returns on each stock and then subtract them.)
Company A has a beta of 0.70, while Company B's beta is 0.95. The required return on the stock market is 11.00%, and the risk-free rate is 4.25%. What is the difference between A's and B's required rates of return? Select the correct answer. a. 1.61% b. 1.63% c. 1.65% d. 1.67% e. 1.69%
Assume the expected return on the market is 7 percent and the risk-free rate is 4 percent. a. What is the expected return for a stock with a beta equal to 1.10? (Enter your answers in decimals. Do not enter percent values.) b. What is the market risk premium? (Enter your answers in decimals. Do not enter percent values.)
A stock has an expected return of 0.15, its beta is 0.52, and the expected return on the market is 0.08. What must the risk-free rate be? (Hint: Use CAPM) Enter the answer in 4 decimals e.g. 0.0123.
2. Calculate the expected (required) return for each of the following stocks when the risk-free rate is 0.08 and you expect the market return to be 0.14. Stock Beta B C A P ש ח ס ח D E 1.72 1.14 0.76 F 0.44 0.03 -0.79
Mulherin's stock has a beta of 1.34, its required return is 8.33%, and the risk-free rate is 2.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Do not round your intermediate calculations. Please explain process and show calculations.
b) Suppose that you observe the following information in Table 2 for stocks A and B: Table 2 Expected Return (%) 11% Stock Beta A 0.8 В 14% 1.5 The risk-free rate of return is 6% and the expected rate of return on the market index is 12%. Using the Single-Index Model, calculate the alpha of both stocks. Show your calculations. Explain what the alpha of the single-factor model represents and interpret your results.
Stock A has a beta of 1.30, and its required return is 11.35%. Stock B's beta is 0.80. If the risk-free rate is 2.90%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Do not round your intermediate calculations. a. 8.10% b. 6.50% c. 7.56% d. 8.45% e. 8.77%
Please show proper steps and explanation. All parts or skip it please.
Please show working Please answer ALL OF QUESTIONS 1 AND 2 1. Assume that the risk-free rate is 3.5% and the market risk premium is 8%. a. What is the required return for the overall stock market? Round your answer to two decimal places. __________ % b. What is the required rate of return on a stock with a beta of 2.4? Round your answer to two decimal places. __________ % 2. An individual has $50,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 2.0. If these are the only two investments in her portfolio, what is her portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places._______
A stock has an expected return of 12.5 percent and a beta of 1.16, and the expected return on the market is 11.5 percent. What must the risk-free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate %
E(FAssume that using the Security Market Line (SML) the required rate of return (RA) on stock A is found to be half of the required return (Rs) on stock B. The risk-free rate (R;) is one-fourth of the required return on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A (BA) to beta of B (BB). a o

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