Suppose that the Treasury bill rate is 9% rather than 6%, as we assumed in Table 12.1, and the expected return on the market is 11%. Use the betas in that table to answer the following questions. a. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) b. Suppose now that you continued to assume that the expected return on the market remained at 11%. Now, what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Suppose that the Treasury bill rate is 9% rather than 6%, as we assumed in Table 12.1, and the expected return on the market is 11%. Use the betas in that table to answer the following questions. a. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) b. Suppose now that you continued to assume that the expected return on the market remained at 11%. Now, what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
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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Question
Suppose that the Treasury bill rate is 9% rather than 6%, as we assumed in Table 12.1, and the expected return on the market is 11%. Use the betas in that table to answer the following questions.
a. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
b. Suppose now that you continued to assume that the expected return on the market remained at 11%. Now, what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
![TABLE 12.1 Betas for
Ticker
Company
Beta
selected common stocks,
January 2013-December 2017
U.S. Steel
3.01
MRO
Marathon Oil
2.39
AMZN
Amazon
1.47
DIS
Disney
1.39
F
Ford
1.26
BA
Boeing
1.24
INTC
Intel
1.07
GE
GE
1.06
PFE
Pfizer
1.02
IBM
IBM
0.94
GOOG
Alphabet
0.94
UNP
Union Pacific
0.90
хом
ExxonMobil
0.82
SBUX
Starbucks
0.75
ко
Coca-Cola
0.70
MCD
McDonald's
0.68
СРВ
Campbell Soup
0.40
WMT
Walmart
0.37
PCG
Pacific Gas & Electric
0.15
NEM
Newmont Mining
0.10](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0eca5089-ab04-44ff-964c-00b2be54bfce%2Fc63bceb8-3e14-43dd-befe-b173f00aea2c%2Fm52qcb_processed.png&w=3840&q=75)
Transcribed Image Text:TABLE 12.1 Betas for
Ticker
Company
Beta
selected common stocks,
January 2013-December 2017
U.S. Steel
3.01
MRO
Marathon Oil
2.39
AMZN
Amazon
1.47
DIS
Disney
1.39
F
Ford
1.26
BA
Boeing
1.24
INTC
Intel
1.07
GE
GE
1.06
PFE
Pfizer
1.02
IBM
IBM
0.94
GOOG
Alphabet
0.94
UNP
Union Pacific
0.90
хом
ExxonMobil
0.82
SBUX
Starbucks
0.75
ко
Coca-Cola
0.70
MCD
McDonald's
0.68
СРВ
Campbell Soup
0.40
WMT
Walmart
0.37
PCG
Pacific Gas & Electric
0.15
NEM
Newmont Mining
0.10
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