Suppose that the S&P 500 is expected to return 11 percent in the next year and T-bills are yielding 2.3 percent. If the beta of stock A is 1.25, then the expected (or required) return for stock A is: Multiple Choice O O O 13.18% 11.00% 10.88% None of these answers is correct 16.05%

Q: Suppose that the PSE composite index will move from 3,500 to 4,266 and rate for T-bills is 5%.  The…

A: The market return of the stock can be calculated by the changes in index. and this market return…

Q: The price of a non-dividend-paying stock is $100. Suppose that the continuously compounded risk-free…

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Q: You are holding a stock that has a beta of 3.37 and is currently in equilibrium. The required return…

A: Beta = 3.37, Expected Return = 31.84% and, Risk Free Rate = 7.0%

Q: A stock has an expected return of 13%, its beta is 0.79, and the risk-free rate is 5%. What must the…

A: We require to calculate the expected return on the market in this question using following details:…

Q: Required Rate of Return AA Corporation's stock has a beta of 0.6. The risk-free rate is 3%, and…

A: To calculate the required return we will use the below formula   Required rate of return = Risk free…

Q: What is the expected return on the market portfolio when T-bills yield 1.7% and the expected return…

A: Using the Capital Asset Pricing Model: R = Rf+β×(Rm-Rf) where, R = Expected Return  Rf = Risk free…

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A: Economy Probability (%) Ideal 0.2 20.0 Good 0.4 15.0 Fair 0.3 8.0…

Q: 1. Using the factor beta estimates and the monthly expected return estimates in the table shown…

A: A risk premium represents the anticipated investment return that an asset is expected to generate…

Q: A stock has a beta of 1.07, the expected return on the market is 10.1 percent, and the risk- free…

A: Beta = 1.07 Market return = 10.1% Risk free rate = 4.9%

Q: Investors expect the market rate of return this year to be 16.50%. The expected rate of return on a…

A: In the given case, we have provided the expected market return rate, beta and the expected…

Q: A stock has a beta of 1.15, the expected return on the market is 10.5%, and the risk - free rate is…

A: The expected return on the stock is calculated using the following equation

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: A stock is currently selling for $90.98 and is expected to sell for $108.98 in 1 year. If the…

A: The return from an investment until it has been held with the investors is often referred to as the…

Q: a) Consider these three stock returns with the following annualised characteristics: Stock A Stock B…

A: The capital asset pricing model is a linear regression model that takes into account the beta,…

Q: You are thinking of buying a stock priced at $100 per share. Assume that the risk-free rate is about…

A: CAPM model is capital asset pricing model which is used to calculate required return. It takes into…

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A: Cost of equity capital is also known as KE. It is the cost which is incurred by the company for…

Q: Suppose that you have estimated the CAPM betas for the equity shares of the following two firms:…

A: Capital Asset Pricing Model is used for determining the required rate of return or the cost of…

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A: To determine if the stock is overpriced or underpriced according to the Capital Asset Pricing Model…

Q: What is the required rate of return on AA's stock?

A: Required rate of return (RRR) is the least required rate at which an investor will agree to invest…

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A: Returns refer to the income earned by the investor for a specific period, it takes into account the…

Q: An analyst at PJ Dealers estimates that the CAPM beta for ZLX stock is 1.9. Given this information…

A: Given: Risk free rate = 2% Market rate = 12% Beta = 1.9

Q: The price of a non-dividend-paying stock is $100. Suppose that the continuously compounded risk-free…

A: Value at risk is a statistical measure used by Investment funds, portfolio managers as well as banks…

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A: Holding Period Return (HPR) is a financial metric that quantifies the total return on an investment…

Q: Assume that the CAPM holds, and refer to the graph below. What is the correlation between stocks B…

A: Here's a detailed explanation for better understanding. To find the correlation between stocks B and…

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A: To determine the Expected Return, Standard Deviation and Beta of Stock A from the data. Return on…

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A: We are given that:P1 (Price after one year) = $107.31P0 (current price) = $97.84D (Dividend income)…

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A: CAPM is also known as capital asset pricing model. It helps in know the expected return on the…

Q: You are thinking of buying a stock priced at $98 per share. Assume that the risk-free rate is about…

A: Holding period return = Dividend paid + ( Price at year 1 - Price at year 0 ) / Price at year 0

Q: What is the standard deviation of returns on a stock priced today at $10 that has a 25.0%…

A: standard deviation of returns on a stock = whereR = return of stockP= probability

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A:

Q: A stock has a beta of 0.65, the expected return on the market is 15%, and the risk- free rate is 8%.…

A: In the given problem we require to calculate the expected return on stock: According to CAPM i.e.…

Q: You expect the risk-free rate to be 4 percent and the market return to be 10 percent. You also have…

A: According to the capital asset pricing model (CAPM), the required return is the return that is…

Q: Calculate the expected rate of return for each stock. (2 decimal) places Stock A Expected Return %…

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A: EXPECTED RETURN The expected return of an investment is the expected value of probable return…

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Q: Required: Investors expect the market rate of return this year to be 19.00%. The expected rate of…

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Q: am. 118.

A: The objective of this question is to revise the expected rate of return on a stock given a change in…

Q: Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 10.00%, and the risk-free…

A: Market risk premium is calculated using following equation Market risk premium = Required return on…

Q: PLEASE ANSWER CORRECTLY FULLY  DONT GIVE ME THE WRONG ANSWER

A: Step 1:a. (Excel formula)rABC = AVERAGE(20%,12%,14%,3%,1%)=10.00%rABC =…

Q: Historical Returns: Expected and Required Rates of Return You have observed the following returns…

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Q: Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal…

A: The mean of the returns refers to the average profits that the investment provides. It is used to…

Q: If the risk free rate is 4 9%, the expected return on the market portfolio is 1296 and the beta of…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: nvestors expect the market rate of return this year to be 17.00%. The expected rate of return on a…

A: Expected Market rate of the return  = Rm = 17%Beta = 0.9Expected rate of  the return = RR =…

Q: A stock has an expected return of 11 percent, its beta is 1.20, and the risk-free rate is 4.4…

A: Formula to Calculate the Expected Equity Return as belowExpected Equity Return = Risk Free return +…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.