Everrest Inc.'s stock has a 46% chance of producing a 12.00% return, a 30% chance of producing a 25.25% return, and a 24% chance of producing a –4.25% return. What is the firm's expected rate of return? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. Group of answer choices

Q: ssume that the risk-free rate is 6.5% and the required return on the market is 8%. What is the…

A: Required rate can be calculated from capital assets pricing formula.

Q: The common stock of Anthony Steel has a beta of 1.5. The risk-free rate is 6 percent and the market…

A: Cost of common stock refers to the return to be earned by the stockholders in the company over the…

Q: Assume that the risk-free rate is 2.5% and the required return on the market is 8%. What is the…

A: According to capital assets pricing model, The expected return on equity stock is calculated as…

Q: A stock has an expected return of 12.4%, the risk-free rate is 6.5%, and the market risk premium is…

A: In the given problem we require to calculate the Beta of the stock using following details: Expected…

Q: (Computing rates of return) From the following price data, compute the annual rates of return for…

A: - The rate of return is calculated by subtracting the beginning value from the final value, then…

Q: The PE ratlð is O A. how much a stock is expected to earn. O B. how much earnings are going to grow.…

A: The answer will be "c" - how much an investor is willing to pay for $1 of earnings.

Q: expected

A: Introduction: Capital asset pricing model or CAPM as it is known widely is a tool which helps in…

Q: Assume that the risk-free rate is 6.5% and the required return on the market is 10%. What is the…

A: Risk free rate (Rf) = 0.065 Market return (Rm) = 0.10 Beta (b) = 3 Required rate of return = ?…

Q: Investors expect the market rate of return this year to be 16.50%. The expected rate of return on a…

A: In the given case, we have provided the expected market return rate, beta and the expected…

Q: A stock is currently selling for $90.98 and is expected to sell for $108.98 in 1 year. If the…

A: The return from an investment until it has been held with the investors is often referred to as the…

Q: A stock is expected to pay a dividend of $1.26 at the end of the year. The required rate of return…

A: Formula: Current stock = Expected dividend/(Required rate - Growth rate)

Q: AA Corporation's stock has a beta of 0.8. The risk-free rate is 2%, and the expected return on the…

A: The required rate of return measure of the profitability of an investment and is used to evaluate…

Q: Suppose that the risk-free rate is 3% and the expected return on the market portfolio is 6%. A…

A: To determine if the stock is overpriced or underpriced according to the Capital Asset Pricing Model…

Q: the actual rates of change were 6% for IP and 2% for INT respectively, What is your best guess for…

A: The required rate of return  is the lowest rate of return an investor would take in exchange for a…

Q: Diddy Corporation stock has a beta of 1.3, the current risk-free rate is 4 percent, and the expected…

A: To calculate Diddy Corporation's cost of equity, we can use the Capital Asset Pricing Model (CAPM).…

Q: You have $50,000 to invest in three stocks. Let Ri be the random variable representing the annual…

A: Let's denote the proportion of the total investment in each stock as follows:x1 = proportion of…

Q: What is the required rate of return on AA's stock?

A: Required rate of return (RRR) is the least required rate at which an investor will agree to invest…

Q: Suppose you buy OMR2000 w the maintenance margin is 3C a. How much have you borrow b. Suppose the…

A: Given: Current worth of stock = OMR 2000 Initial margin = 60%  Maintenance margin = 30%

Q: A stock has an expected return of 17 percent, its beta is 1.35, and the risk-free rate is 4 percent.…

A: CAPM is capital asset pricing model to compute the cost of equity based on company risk index as…

Q: A stock is expected to pay a dividend of $1.27 at the end of the year. The required rate of return…

A: Formula: Current stock price = Expected dividend / (Required return - Growth rate)

Q: You are evaluating a stock that just paid a dividend of S4.6. Dividends are expected to grow at a…

A: This Question is based on dividend discount model. We are required to calculate the value of stock…

Q: risk-free rate is 6.5% and the required return on the market is 9%. What is the required rate of…

A: Required rate is expected rate of stock based on the beta of stock that is risk related to the…

Q: The expected return on stock A is 11.70 percent. The expected return on stock B is 9.40 percent.…

A: The objective of the question is to calculate the risk premium using the Capital Asset Pricing Model…

Q: A stock has an annual return of 13 percent and a standard deviation 60 percent. What is the smallest…

A: The smallest expected loss or gain depicts that if the probability of unfavorable circumstances is…

Q: Today, a firm has a stock price of $14.26 and an EPS of $1.15. Its close competitor has an EPS of…

A: The method of comparable is often used in finance for the purpose of valuation. This method is also…

Q: What should be the market price of the stock?   $     If the current market price of the stock is…

A: Share Price: The price of a share is an indication of its present value to buyers and sellers.…

Q: Skupos Inc.'s stock has a 40% chance of producing a 8% return, a 10% chance of producing a 8%…

A: The expected rate of return is the anticipated rate of return. The expected or the anticipated rate…

Q: Suppose S = $96, K = $100, u = 1.03, d = 0.97, and R = 1.02. The risk-neutral probability, q, that…

A: In this question, we are required to determine the risk-neutral probability.

Q: A company has a beta of 0.6, the T-bill rate is 4.3%, and the expected return on the market  is…

A: The required rate of return can be calculated with the help of CAPM equation.

Q: (Expected rate of return using CAPM) a. Compute the expected rate of return for Acer common stock,…

A: CAPM is a financial model used to determine the expected rate of return on investment, particularly…

Q: A stock has a required return of 11%, the risk-free rate is 3.5%, and the market risk premium is 5%.…

A: The objective of the question is to calculate the beta of the stock and to understand the impact of…

Q: The risk-free rate of return is 2 percent, and the expected return on the market is 6.1 percent.…

A: Value of stock can be determined based on the dividend and growth of dividend and required rate of…

Q: outlook for the comin Compute the expected rate of retum E(R) for Lauren Labs. Round your answer to…

A: Expected return is the sum of product between the possible returns and their corresponding…

Q: A stock has a beta of 0.65, the expected return on the market is 15%, and the risk- free rate is 8%.…

A: In the given problem we require to calculate the expected return on stock: According to CAPM i.e.…

Q: Taggart Inc's stock has a 50% chance of producing a 20% return, a 30% chance of producing a 10%…

A: The expected return is the estimation of profit or loss that an investor determines from his…

Q: (a) A financial analyst would like to study the stock market in Hong Kong. It is believed that the…

A: The complete table is given below.StemLeaf024123723323884001233446678951224668Explanation:A…

Q: (Computing rates of return) From the following price data, compute the annual rates of return for…

A: Rate of return = [(V1 - V0) / V0 ] X 100WhereV1= Current valueV0 = Previous value

Q: what is the stock's expected total return

A: The method used for estimating the value of the stock is known as Dividend Discount Model (DDM): It…

Q: Suppose that your estimates of the possible one-year returns from investing in the common stock of…

A: A statistical measure that represents the variation in the return on the stock is term as the…

Q: You are considering the purchase of a new stock. The stock is expected to grow at 2.52% for the…

A: Given information, Growth rate (g) = 2.52% or 0.0252Just paid dividend (D0) = $2.88Required rate of…

Q: Freedman Flowers' stock has a 50% chance of producing a 25% return, a 30% chance of producing a 10%…

A: The objective of the question is to calculate the expected rate of return for Freedman Flowers'…

Q: PLEASE ANSWER CORRECTLY FULLY  DONT GIVE ME THE WRONG ANSWER

A: Step 1:a. (Excel formula)rABC = AVERAGE(20%,12%,14%,3%,1%)=10.00%rABC =…

Q: A stock is expected to pay a dividend of $1.99 at the end of the year. The required rate of return…

A: As per the  dividend discount model , the value of the company stock is the instrinsic value or the…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.