Given the beta of a firm’s shares is 0.9 and expected return to the market is 8%, calculate the cost of equity capital for the firm.  The risk-free rate of return is 4%.   Question 19 options:   1)  4%   2)  7.6%   3)  8%   4)  None of the above

Q: If share C has a beta of 1,3; the risk-free rate is 8% and market risk premium is 7%, what would the…

A: Step 1: Given Value for Calculation Beta = b = 1.3Risk Free rate = rf = 8%market Risk Premium = mrp…

Q: Assuming the CAPM or one-factor model holds, what is the cost of equity for a firm if the firm's…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: 8.4   Assume that the risk-free rate is 3% and the market risk premium is 4%. What is the…

A: Required Rate is the least return that is anticipated by an investor on any security. It is…

Q: Beta for Stock Y given the Expected Return of Stock Y is 20.4% The expected return on the Market…

A: The given problem can be solved using Capital asset pricing model.

Q: A firm has a beta of 0.90. The market return equals 12% and the risk-free rate of return equals 4%.…

A: According to Capital asset pricing model ,k = Rf+[β * (Rm-Rf) ]wherek=estimated cost of common stock…

Q: stock expected return beta a 9.01% 1.7 b 7.06% 0.0 c 5.04% 0.67 d 8.74% 0.87 e 11.5%…

A: Risk free rate = 7% Market risk premium = 2%

Q: Everjust, Inc., stock has an expected return of 16 percent. The risk-free rate is 3 percent and the…

A: The Capital Asset Pricing Model (CAPM) refers to the model which tells us how the financial markets…

Q: Find the Expected Return on the Market Portfolio given that the Cost of Equity is 14% and Risk-Free…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: A stock has a required return of 13%, the risk-free rate is 4.5%, and the market risk premium is 4%.…

A: In order to calculate the stock's beta, we can use the the formula given under capital asset pricing…

Q: FlavR Co stock has a beta or 2.04, the current risk-free rate is 2.04 percent, and the expected…

A: In the given question we are require to calculate the FlavR co's cost of equity: We can calculate…

Q: Your company's common stock has a beta of 0.7. If the risk-free rate is 2.27 percent and the…

A: Risk free rate (rf) = 0.0227 Return on market (rm) = 0.1225 Beta (b) = 0.7   Cost of equity = ?   We…

Q: 3. Capital Asset Pricing Model A. Suppose you invest $400,000 in Treasury Bills that have a yield to…

A: Treasury bond yield or risk free rate is 4% Expected return for Dell Inc. is 8% Beta of Dell Inc. is…

Q: If a firm's beta is 1.1, the risk-free rate is 6%, and the expected return on the market is 14%,…

A: Details given are : Beta = 1.1 Risk free rate = 6% Expected market return = 14% We need to compute…

Q: (b) Write the equation of the Security Market Line (SML). Compute and draw the SML when the expected…

A: We will be solving the question b i.e. the security Market Line , Compute and draw the SML when the…

Q: 1. Assume the risk free interest rate is 3%, the market rate of return is 7% and beta for company X…

A: AS you have posted multiple questions, we will solve first question for you. If you want remaining…

Q: Assuming that the expected market return [E(Rm)] is 11% and the risk-free rate of return (Rf) is 8%,…

A: The cost of equity refers to the required rate of return that is expected from the investment. It is…

Q: None

A: The Cost of Equity (ke) is the minimum threshold for the required rate of return for equity…

Q: Consider a stock that has a Beta of 0.85. You expect the long-term return on the market to be 9.75%…

A: CAPM is also known as capital asset pricing model. It helps in know the expected return on the…

Q: Assume that the risk-free interest rate is 3%, the market rate of return is 7% and the beta for…

A: The comparison of the whole market with the systematic risk or volatility of a stock or the…

Q: Dhofar Energy Services has a Beta = 1  The risk-free rate on a treasury bill is currently 4.4% and…

A: By Capital asset pricing model: Cost of equity = Rf + ß*(Rm - Rf) Rm = (Cost of equity - Rf)/ß + Rf

Q: Assume the risk free interest rate is 3%, the market rate of return is 7% and beta for company X is…

A: 1) Non diversifiable risk for the company = Market rate of return - risk free rate

Q: Find the Beta for Stock given the cost of equity is 14.2% The expected return on the market is 9.4%…

A: Through CAPM, we can find the beta of the stock. Formula for finding beta will be as below. Expected…

Q: c. An investor wants to implement a returns-based momentum strategy. Using the method in the Study…

A: Momentum investing is a strategy in which securities are bought at high to be sold at higher price.…

Q: risk

A: Required return = Risk free rate + Market risk premium * Beta

Q: None

A: To find the market risk premium and the expected rate of return on the market using the Capital…

Q: Using CAPM to determine the expected rate of return for risky assets, consider the following example…

A: The Capital Asset Pricing Model (CAPM) is a widely used financial model that provides a framework…

Q: If the expected rates of return on Portfolio A and B are 11% and 14% respectively and the Beta of A…

A: CAPM or Capital Asset Pricing Model is a model which defines the relationship between expected…

Q: a) Firm A has systematic risk beta and ROE (return on equity) equal 0.8 and 7% respectively. The…

A: Price earning ratio or multiple is the ratio of the market price and earning per share. It indicates…

Q: Question: You are an investment advisor. You currently own two stocks, A and B, with the following…

A: Calculation for Stock X:

Q: Return on HC's Stock 0.5 1.0 1.5 20 RISK (Beta)

A: Capital assets price is used extensively predict required rate of stock considering the risk of the…

Q: The risk-free rate is 3%, the market risk premium (MRP) is 8%, and the Beta of Lotsa Dough common…

A: Risk free rate = 3% Market risk premium = 8% Beta = 0.90

Q: Zacher Co.'s stock has a beta of 1.50, the risk-free rate is 4.25%, and the market risk premium is…

A: Given data; beta of stock = 1.50 risk free rate = 4.25% market risk premium = 5.50%

Q: 1. You think MBB stock has potential for an upward move in price. You have no position whatsoever in…

A: An option contract gives the right to its buyer to sell or buy the assets or securities at today’s…

Q: The Nixon Corporation's common stock has a cost of capital of 12 percent. If the market risk premium…

A: The capital structure of a corporation is the combination of the sources of financing through which…

Q: Question: BRICS Company has a beta of 0.8. The risk-free rate is equal to 3% and the expected market…

A: Expected return is calculated under CAPM is also called KE ( Cost of equity). It is that which was…

Q: Listen The risk-free rate is 1.45% and the market risk premium is 5.21%. According to the Capital…

A: Capital Asset Pricing Model (CAPM) is an alternative model to find out the required rate of return…

Q: C. Problem: Company C's stock has beta 1.2, the risk-free rate is 6%, and the market expected return…

A: Cost of Equity = Risk free Rate + [(Beta *(Market Return - Risk free Rate)]

Q: Find the Expected Return on the Market Portfolio given that the Cost of Equity is 14% and Risk-Free…

A: The capital asset pricing model is the model of valuing the required rate of return of a stock an…

Q: According to the CAPM, what must be the risk-free rate if the expected return on a firm's common…

A: For a stock, the required return as per CAPM is known. The risk free rate is to be quantified. The…

Q: Stock A's stock has a beta of 1.30, and its required return is 10.25%. Stock B's beta is 0.80. If…

A: The required rate of return represents the minimum expected return sought by investors. The required…

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.