Nishikori is now evaluating the expected performance of 2 common stocks. AOA Labs Inc and YLC Inc. He has gathered the following information: The risk-free rate is 4% The expected return on the market portfolio is 12% The beta of AOA Labs Inc stock is 1.7 The beta of YLC Inc stock is 0.7 Based on his own analysis, Nishikori’s forecasts of the returns on the stocks are 13.5% for AOA Labs Inc and 11% for YLC Inc stock. Calculate the required rate of return for AOA Labs Inc stock and YLC Inc stock. Which investment is better?

Nishikori is now evaluating the expected performance of 2 common stocks. AOA Labs Inc and YLC Inc. He has gathered the following information: The risk-free rate is 4% The expected return on the market portfolio is 12% The beta of AOA Labs Inc stock is 1.7 The beta of YLC Inc stock is 0.7 Based on his own analysis, Nishikori’s forecasts of the returns on the stocks are 13.5% for AOA Labs Inc and 11% for YLC Inc stock. Calculate the required rate of return for AOA Labs Inc stock and YLC Inc stock. Which investment is better?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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