5. Given an expected return for the market of 12%, with a standard deviation of 20%, and arisk-free rate of 8%, consider the following data:Required return (%)12StockBeta0.8AB1.213C0.610Assume that an analyst, using fundamental analysis. Which stock would be recommendedfor purchase?

Required rate can be calculated from the capital assets pricing model and if required rate is less…

Answered: k-free rate of 8%, consider the…

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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only typed answer Stock A's stock has a beta of 1.30, and its required return is 15.25%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Select the correct answer. a. 11.15% b. 11.18% c. 11.21% d. 11.24% e. 11.27%
1. If a stock has a(Alpha)=0.002, b(Beta)=1.4, Using the market model (eq. 7.4), find the expected percent return for the above stock if the market return is expected to be 2% and the risk free rate is 1%. 2. Assume stock prices follow a random walk and a particular stock has had the following recent stock prices: Day 1: 129.5 Day 2: 126.9 Day 3: 127.1 what is the best estimate of day 4 prices?
If the risk premium on the stock market was 6.69 percent and the risk-free rate was 2.51 percent, what is the stock market return? Multiple Choice 4.18% 9.20% 7.36% 10.04% 6.69%
What is the risk premium for Stock C, given it has a beta of 2, and the market risk premium of 12%. (Answer as a whole percentage. i.e. 5.25%, not 0.0525)
Required Rate of Return Stock R has a beta of 1.3, Stock S has a beta of 0.75, the expected rate of return on an average stock is 9%, and the risk-free rate is 5%. By how much does the required return on the riskier stock exceed that on the less risky stock? Do not round intermediate calculations. Round your answer to two decimal places.
Problem 2: You are given the following probability distribution for a stock: Pr. Outcome 4 -4% .6 12% A. Compute the expected return B. Compute the standard deviation C. Presuming the stock returns are normally distributed, what do these results indicate?

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k-free rate of 8%, consider the following data: Required return (%) 12 Stock Beta 0.8 A B 1.2 13 C 0.6 10 sume that an analyst, using fundamental analysis. Which stock would be recommende - purchase?