Compute a fair rate of return for Tesla common stock, which has a 1.4 beta. The risk-free rate is 5 percent, and the market portfolio (S&P 500 stocks) has an expected return of 10 percent.
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- Expected return? Financial accountingAmDa’s common stock has a beta of 1.4. The market risk premium is 5% and the risk-free rate is 2%. What is the required rate of return on this stock according to CAPM?The rate of return on the market stock index is 13 percent. The rate of return on a risk-freebank account is 1%. The B (beta) of stock XYZ is 1.5. Use the data to answer the questionsbelow.a. What is the market risk premium? Show your work.b. What is the cost of equity for XYZ? Show your work.c. What is the stock XYZ risk premium? Show your work.d. Draw the graph of the Security Market Line and show the stock of XYZ on the graph.The end-of-year dividend on stock ABC is expected to be $0.8. The growth rate of dividend isexpected to be 5 percent for ever. The current price of the ABC stock is $10. Use the data toanswer the questions below.e. What is the cost of equity for stock ABC? Show your work.f. Suppose stock KLM has the same end-of-year dividend, dividend growth rate andprice as stock ABC, but the risk of KLM stock is much greater than of the ABC stock.What is your estimate of the cost of equity of stock KLM using the method at part e?Do you agree with the valuation of the cost of…
- The current risk-free rate of return, rRF, is 2 percent and the market risk premium, RPM, is 8 percent. If the beta coefficient associated with a firm's stock is 1.4, what should be the stock's required rate of return? Round your answer to one decimal place. _______ ´%You are using the CAPM to calculate a fair return for Stardust common stock. The shares have a volatility of 28.00%, while the market has a volatility of 15.00%. The correlation between the two sets of returns is 0.3. The risk free rate is 2.60%, while the expected return on the market is 4.80%. What is the fair return for Stardust common stock?Please help with this question with full working out.
- stoch XYZ has an expected return of 12% and risk of Beta=1. stock ABC has expected return of 13% and Beta= 1.5. the market's expected return is 11% and Rf = 5%. according to the CAPM, calculate the expected return of each stock. also draw the SML curve. please show the calculation using excelThe expected return for a stock, calculated using the CAPM is 13.5%. The risk free rate is 7.5% and the beta of the stock is 0.80. Calculate the implied return on the market.The current risk-free rate of return, rRF, is 4 percent and the market risk premium, RPM, is 8 percent. If the beta coefficient associated with a firm's stock is 1.6, what should be the stock's required rate of return? Round your answer to one decimal place. ´%