General Accounting If the risk-free rate is 0.02, the market riskpremium is 0.07, and the beta of the stockis 1.2, what is the return of the stock?

Step 1: Define Required Return RateThe minimum return expected by the investor on the investment is…

Answered: If the risk-free rate is 0.02, the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 1P

See similar textbooks

Similar questions

The risk-free rate is 5.6%, the market risk premium is 8.5%, and the stock’s beta is 2.27. What is the required rate of return on the stock, E(Ri)? Use the CAPM equation.
How do you find the market risk premium and market expected return given the expected return of stock, beta, and risk free rate? Example: The expected return of a stock with a beta of 1.2 is 16.2%. Calculate the market risk premium and the market expected return, given a risk-free rate of 3%.
Provide answer financial accounting
Suppose risk-free rate of return = 2%, market return = 7%, and Stock B’s return = 11%. a. Calculate Stock B’s beta. b. If Stock B’s beta were 0.80, what would be its new rate of return?
If a stock has a beta of 0.8, what doesthat imply about its risk relative to the market?
A stock's risk premium is equal to the: expected market risk premium times beta. expected market risk premium multiplied by beta plus the risk-free return. Risk-free return plus expected market return. expected market return times beta.
The risk-free rate of return is currently 0.03, whereas the market risk premium is 0.04. If the beta of RKP, Inc. stock is 1.4, then what is the expected return on RKP?
The risk-free rate is 5.6%, the market risk premium is 8.5%, and the stock's beta is 2.27. What is the required rate of return on the stock, E(Ri)?
Suppose risk-free rate of return = 2%, market return = 7%, and Stock B’s return = 11%. Calcuate Stock B’s beta. If Stock B’s beta were 0.80, what would be its new rate of return?
Alpha of stock
*Stock A has a beta of 1.3 and an expected return of 10.2. Stock B has a beta of 0.8 and an expected return of 8.7. If these stocks are priced correctly according to the CAPM, what is the risk-free rate? Give your answer in percentage to the nearest basis point.
Suppose you estimate that the correlation between Abercrombie and Fitch (ANF) stock returns with market portfolio returns is 0.85. You also estimate that ANF's stock return's are twice as variable (σANFσM=2.0). Therefore, what is the the beta for ANF stock (βANF) ?

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

SEE MORE TEXTBOOKS

If the risk-free rate is 0.02, the market risk premium is 0.07, and the beta of the stock is 1.2, what is the return of the stock?