Suppose the yield on short-term government securities (perceived to be risk-free) is about 4%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 10.0%. According to the capital asset pricing model: a. What is the expected return on the market portfolio? (Enter your answer as a percentage rounded to 1 decimal places.) Expected rate of return b. What would be the expected return on a zero-beta stock? (Enter your answer as a percentage rounded to 1 decimal places.) Expected rate of return Suppose you consider buying a share of stock at a price of $30. The stock is expected to pay a dividend of $7 next year and to sell then for $31. The stock risk has been evaluated at B 0.5 c-1. Using the SML, calculate the fair rate of return for a stock with a B = 0.5. (Negative value should be indicated by a minus sign. Enter your answer as a percentage rounded to 2 decimal places.) Fair rate of return c-2. Calculate your expected rate of return for the stock with a B expected price and dividend for next year. (Enter your answer as a percentage rounded to 2 decimal places.) 0.5, using the Expected rate of return
Suppose the yield on short-term government securities (perceived to be risk-free) is about 4%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 10.0%. According to the capital asset pricing model: a. What is the expected return on the market portfolio? (Enter your answer as a percentage rounded to 1 decimal places.) Expected rate of return b. What would be the expected return on a zero-beta stock? (Enter your answer as a percentage rounded to 1 decimal places.) Expected rate of return Suppose you consider buying a share of stock at a price of $30. The stock is expected to pay a dividend of $7 next year and to sell then for $31. The stock risk has been evaluated at B 0.5 c-1. Using the SML, calculate the fair rate of return for a stock with a B = 0.5. (Negative value should be indicated by a minus sign. Enter your answer as a percentage rounded to 2 decimal places.) Fair rate of return c-2. Calculate your expected rate of return for the stock with a B expected price and dividend for next year. (Enter your answer as a percentage rounded to 2 decimal places.) 0.5, using the Expected rate of return
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
Related questions
Question
need help with all
Transcribed Image Text:Suppose the yield on short-term government securities (perceived to be risk-free) is
about 4%. Suppose also that the expected return required by the market for a portfolio
with a beta of 1 is 10.0%. According to the capital asset pricing model:
a. What is the expected return on the market portfolio? (Enter your answer as a
percentage rounded to 1 decimal places.)
Expected rate of
return
b. What would be the expected return on a zero-beta stock? (Enter your answer as a
percentage rounded to 1 decimal places.)
Expected rate of
return
Suppose you consider buying a share of stock at a price of $30. The stock is expected
to pay a dividend of $7 next year and to sell then for $31. The stock risk has been
evaluated at B 0.5
c-1. Using the SML, calculate the fair rate of return for a stock with a B = 0.5. (Negative
value should be indicated by a minus sign. Enter your answer as a percentage
rounded to 2 decimal places.)
Fair rate of return
c-2. Calculate your expected rate of return for the stock with a B
expected price and dividend for next year. (Enter your answer as a percentage
rounded to 2 decimal places.)
0.5, using the
Expected rate of
return
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
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.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education