Olmsted Inc. has a beta of 1.38. The T-Bill rate is 3.87%, the rate of inflation is 3.93%, and the market risk premium is 9.03%. What is the expected return on Olmsted's stock? Group of answer choices 19.21 percent 13.43 percent 10.83 percent 16.33 percent 18.65 percent

Olmsted Inc. has a beta of 1.38. The T-Bill rate is 3.87%, the rate of inflation is 3.93%, and the market risk premium is 9.03%. What is the expected return on Olmsted's stock? Group of answer choices 19.21 percent 13.43 percent 10.83 percent 16.33 percent 18.65 percent

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 7P

See similar textbooks

Related questions

Q: Assume that the risk-free rate is 5.5% and the market risk premium is 7%. What is the required…

A: In this we have to use capital assets pricing model to solve the problem.

Q: The risk-free rate is 4.15 percent. What is the expected risk premium on this stock given the…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: B24&Co stock has a beta of 1.59, the current risk-free rate is 3.09 percent, and the expected…

A: Given that:Risk free rate is 3.09%Expected market return is 10.59%Stock beta is 1.59We need to…

Q: Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 8.25%, and the risk-free…

A: Here, The question demands required rate of return of market not of stock therefore to calculate the…

Q: The stock of Alphabet Corp. has a beta of .98. The market risk premium is 9 percent and the…

A: Given the following: Risk Free rate, Rrf = 4.4% Market risk premium, Rm-Rrf = 9% Beta = 0.98 As per…

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: FlavR Co stock has a beta of 2.15, the current risk-free rate is 2.15 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: The common stock of Pittsburgh Steel Products has a beta of 1.2 and a standard deviation of 9.75…

A: Risk-free rate = 3%Market return = 12.2%Beta = 1.2Standard deviation = 9.75%

Q: Assume that the risk-free rate is 6.5% and the market risk premium is 5%. What is the required…

A: Solution:-Capital Asset Pricing Model (CAPM) is a model which gives a formula to calculate the…

Q: FlavR Co stock has a beta of 2.03, the current risk-free rate is 2.03 percent, and the expected…

A: We are require to calculate the FlavR co's cost of equity in this question : We can calculate the…

Q: TJ Co stock has a beta of 1.64, the current risk-free rate is 5.94 percent, and the expected return…

A: In the given question we are require to calculate the TJ co cost of equity from following details:…

Q: The risk-free rate of return is 3.7 percent and the market risk premium is 6.2 percent. What is the…

A: The given question can be solved using capital asset pricing model (CAPM)

Q: A stock has an expected return of 16 percent, its beta is 0.45, and the risk-free rate is 6.4…

A: CAPM is an investment theory that establishes the relationship between the expected return and the…

Q: Assume that the risk-free rate is 7.5% and the market risk premium is 8%. What is the required…

A: The required rate of return can be ascertained by using the Capital Asset Pricing Model (CAPM). The…

Q: An analyst gathers the following data: * Expected (estimated) rate of return on the market = 15% *…

A: Expected (estimated) rate of return on the market = Rm =15%Risk Free Rate = Rf = 8%Expected…

Q: The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. What is the…

A: Capital Asset Pricing Model : This model is used to calculate the expected rate of return or cost of…

Q: A stock has a beta of 1.68, the expected return on the market is 14.72, and the risk-free rate is…

A: As per CAPM formula Expected return on stock = Risk free return + Beta*(Market return-Risk free…

Q: The risk-free rate is 6 percent and the expected market risk premium is 8 percent. What is the…

A: Following details are given to us in the question : Risk free rate (Rf) = 6% Beta (B) = 0.7 Market…

Q: B24&Co stock has a beta of 1.69, the current risk-free rate is 3.19 percent, and the expected…

A: Cost of equity of a firm can be calculated using the Capital Asset Pricing Model.

Q: Assume that the risk-free rate is 6.5% and the market risk premium is 8%. What is the required…

A: The CAPM is used to find out the return of a stock based on the systematic risk the stock faces and…

Q: Review the following market information: Current Stock Market Return 11.25%…

A: As per CAPM, Required Return = Risk free Rate + Beta * (Market return - risk free rate) where, Risk…

Q: B24&Co stock has a beta of 1.66, the current risk-free rate is 3.16 percent, and the expected return…

A: Here, Risk Free Rate is 3.16% Beta is 1.66 Expected Return on the Market is 10.66%

Q: B24&Co stock has a beta of 1.62, the current risk-free rate is 3.18%, and the stock market risk…

A: In this question we require to calculate the B24&co's Expected return. As per to CAPM: Expected…

Q: The risk-free rate of return is 4 percent and the market risk premium is 8 percent. What is the…

A: In given question we need to compute the expected rate of return for stock.

Q: Assume that the risk-free rate is 7.5% and the market risk premium is 3%. What is the required…

A: Risk free rate = 7.5% Market risk premium = 3% Beta of overall market = 1 As per CAPM, the…

Q: A stock has an expected return of 15 percent. Beta is 0.75. And the risk-free rate is 75 percent.…

A: Given the following information: Expected return on stock (r) = 15% Beta (b) = 0.75 Risk free rate…

Q: The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. If the…

A: Using CAPM Model,

Q: Zacher Co.'s stock has a beta of 1.28, the risk-free rate is 4.25%, and the market risk premium is…

A: The required rate of return is the rate required by investors as per the risk involved. It can be…

Q: A stock has an expected return of 18 percent and a beta of 1.4. The risk-free rate is 3.5 percent.…

A: Slope of the security market line = (Expected return - Risk free rate) / Beta

Q: The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. If the…

A: The Capital Asset pricing model is important model when dealing with the…

Q: B24&Co stock has a beta of 1.50, the current risk- free rate is 3.00 percent, and the expected…

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

Q: Assume that the risk-free rate is 5.5% and the market risk premium is 7%. What is the required…

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

Question

Olmsted Inc. has a beta of 1.38. The T-Bill rate is 3.87%, the rate of inflation is 3.93%, and the market risk premium is 9.03%. What is the expected return on Olmsted's stock?

Group of answer choices

19.21 percent

13.43 percent

10.83 percent

16.33 percent

18.65 percent

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Explanation of CAPM

VIEW

Step 2: Calculation of expected return of the stock

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

B24&Co stock has a beta of 1.59, the current risk-free rate is 3.09 percent, and the expected return on the market is 10.59 percent. What is B24&Co's cost of equity? Multiple Choice A. 19.93% B. 15.02% C. 15.27% D. 24.84%
B24&Co stock has a beta of 1.69, the current risk-free rate is 3.19 percent, and the expected return on the market is 10.69 percent. What is B24&Co's cost of equity? Multiple Choice 15.87% 26.65% 15.57% 21.26%
The risk-free rate of return is 3.7 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21 O a. 10.92 percent O b. 11.40 percent O c. 11.20 percent O d. 12.47 percent
FlavR Co stock has a beta or 2.04, the current risk-free rate is 2.04 percent, and the expected return on the market is 9.04 percent. What is FlavR Co's cost of equity? a. 16.32% b.20.48% c. 13.12% d. 11.08%
The expected risk premium on a stock is equal to the expected return on the stock minus the: Group of answer choices inflation rate. expected market rate of return. standard deviation. risk-free rate. A stock just paid a dividend of P1.50. The expected rate of return is 10.1%, and the constant growth rate is 4.0%. What is the current stock price? Group of answer choices P23.11 P25.57 P24.31 P23.70
TJ Co stock has a beta of 1.64, the current risk-free rate is 5.94 percent, and the expected return on the market is 14.19 percent. What is TJ Co's cost of equity? O 29.21% O 19.47% O 21.77% O 33.01%
Assume that the risk-free rate is 7.5% and the market risk premium is 8%. What is the required return for the overall stock market? Round your answer to one decimal place. ? % What is the required rate of return on a stock with a beta of 0.4? Round your answer to one decimal place. ? %
The risk-free rate is 4.15 percent. What is the expected risk premium on this stock given the following information? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Probability of Rate of Return if State State of the Economy State of Economy Вoom Occurs 0.35 16% Normal 14% 0.65
B24&Co stock has a beta of 1.50, the current risk- free rate is 3.00 percent, and the expected return on the market is 10.50 percent. What is B24&Co's cost of equity? Which of the following is correct? а.) 15.00% b.) 14.25% c.) 23.25% d.) 18.75%
B24&Co stock has a beta of 1.62, the current risk-free rate is 3.18%, and the stock market risk premium is 8.50%. What is B24&Co's return (in percentage. If the return is 10.38%, please enter 10.38)?
The stock of Alphabet Corp. has a beta of .98. The market risk premium is 9 percent and the risk-free rate is 4.4 percent. What is the expected return on Alphabet stock? Group of answer choices 8.91% 9.43% 10.67% 11.25% 13.22%
The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21? a. 11.4%b. 13.6%c. 15.4%d. 17%