Security is fairly priced and has an expected rate of return of 0.13. The market expected rate of return is 0.13 and the risk-free rate is 0.04. The beta of the stock is ___ (approx)? less than 1 1 more than 1
Q: The expected market rate of return is 12%, and the risk free rate is 3%. Stock A has a beta of 1.25.…
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A: Required return = Risk free Rate + Beta * (Required rate of return on market - risk free rate)
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Q: Assume that a security is fairly priced and has an expected rate of return of 0.13. The market…
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A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…
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A: Given, Beta = 1.25 Risk-free rate = 1.5% Expected market return = 10.2%
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A: The slope of SML is Return of Market minus Rf. Note: Rf= Risk-free Rate SML= Security Market Line
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- Assume that a security is fairly priced and has an expected rate of return of 0.13. The market expected rate of return is 0.13, and the risk-free rate is 0.04. The beta of the stock is A. 1.7. B. 0.95. C. 1. D. 1.25.A security has an expected rate of return of 0.11 and has a beta (B) of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09. Show whether this security is underpriced, fairly priced or overpriced. 1. The returns on share A follow the market model with coefficients aa = 0.01, Ba = 1.25. If at time t, K MT = 0.02 and the actual return on share A is 0.025, calculate EAt (the error term). 2. 3. An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 70 percent in a risk-free asset with a return of 0.06. Calculate the portfolio's expected return. 4. Toyota stock has the following probability distribution of expected prices one year from now: State Probability Price 1 25% 40% £50 2 £60 3 35% £70 Currently, each share is priced at £55. Toyota will pay a dividend of £4 per share at the end of the year. What is your expected holding-period return on Toyota? 5. According to the Capital Asset…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?
- *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.Stock A has a beta coefficient = 1.12. calculate the expected rate of return of the stock A given that the risk-free rate is 0.36 and the annual return is 0.12. give your answer in 0.000.A stock has a beta of 1.32 and an expected return of 12.8 percent. The risk-free rate is 3.6 percent. What is the slope of the security market line? Can the calculator and excel solution be provided?
- Stock Y has a beta of 1.2. An expected return of 11.4%. Stock Z has a beta of .8 and an expected return of 8%. If the risk free rate is 2.5% and the market risk premium is 7%, are these stocks priced correctly? If not, what should the correct prices be? pls type in computer. ThanksSuppose we estimate SBUX to have β=0.80 when the market premium is 9% and the risk free rate is 3%. However, if SBUX is currently priced to return 9%, then according to the CAPM model SBUX stock is currently _______________ . A) overvalued B) undervalued C) priced just right!Security A has a beta of 1.16 and an expected return of .1137 and Security B has a beta of .92 and expected return of .0984 - these securities are assumed to be correctly priced. Based on CAPM, what is the return on the market?
- A stock has an expected return of 0.11, its bets is 0.82, and the risk-free rate is 0.04. What must the expected return on the market be?(d) Suppose the risk-free rate is 4%, the market risk premium is 15% and the betas for stocks X and Y are 1.2 and 0.2 respectively. Using the CAPM model, estimate the required rates of return of Stock X and Stock Y. (e) Given the results above, are Stocks X and Y overpriced or underpriced? Explain.(d) Suppose the risk-free rate is 4%, the market risk premium is 15% and the betas for stocks X and Y are 1.2 and 0.2 respectively. Using the CAPM model, estimate the required rates ofreturn of Stock X and Stock Y. (e) Given the results above, are Stocks X and Y overpriced or underpriced? Explain.