The average return on the Market is 12% while the market risk premium is 7%. What is the require rate of return of the portfolio? (In percentage) Blue Co. has a collection of shares that is publicly trade. The value of each security and its stock beta are as follows: stock Investment Beta CEB 3,000,000 2 SMC 3,000,000 1.2 SCC 800,000 .5 MTB 1,200,000 1

The average return on the Market is 12% while the market risk premium is 7%. What is the require rate of return of the portfolio? (In percentage) Blue Co. has a collection of shares that is publicly trade. The value of each security and its stock beta are as follows: stock Investment Beta CEB 3,000,000 2 SMC 3,000,000 1.2 SCC 800,000 .5 MTB 1,200,000 1

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 7P

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The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: 00.51.01.52.020.016.012.08.04.00REQUIRED RATE OF RETURN (Percent)RISK (Beta)Return on HC's Stock CAPM Elements Value Risk-free rate (rRFrRF) Market risk premium (RPMRPM) Happy Corp. stock’s beta Required rate of return on Happy Corp. stock An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.’s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst’s prediction. Happy Corp.’s new required rate of return is . Tool tip: Mouse over the points on…
b) Calculate the beta of the following portfolio. Amount invested Stock Security Beta A RM6,700 1.58 B RM4,900 1.23 C RM8,500 0.79
Assume that the financial markets are in equilibrium. Information on three particular shares is provided in the table below. Find the risk free rate and the expected return on the market portfolio. Asset A B C A. 6%, 18% B. 6%, 14% C. 5%, 18% D. 7%, 16% E. 5%, 14% Expected Return 7.6% 12.4% 15.6% Beta 0.2 0.8 1.2
What is the beta of the portfolio held by Blue Co.?
What is the beta of the portfolio held by Blue Co.? Blue Co. has portfolio fund consist of three stock s as follows stock invetsment beta monde 2,500,000 1.3 bdo 1,300,000 average pal 1,200,000 (.50)
The rate of return on the market stock index is 13 percent. The rate of return on a risk-freebank account is 1%. The B (beta) of stock XYZ is 1.5. Use the data to answer the questionsbelow.a. What is the market risk premium? Show your work.b. What is the cost of equity for XYZ? Show your work.c. What is the stock XYZ risk premium? Show your work.d. Draw the graph of the Security Market Line and show the stock of XYZ on the graph.The end-of-year dividend on stock ABC is expected to be $0.8. The growth rate of dividend isexpected to be 5 percent for ever. The current price of the ABC stock is $10. Use the data toanswer the questions below.e. What is the cost of equity for stock ABC? Show your work.f. Suppose stock KLM has the same end-of-year dividend, dividend growth rate andprice as stock ABC, but the risk of KLM stock is much greater than of the ABC stock.What is your estimate of the cost of equity of stock KLM using the method at part e?Do you agree with the valuation of the cost of…
The following information is related to X corporation: X's Beta was 1.3, market index 1 January 2020 was 100, market index 31 December 2020 was 110 and interest on treasury bills was 0.03 (risk free). Stock returns using the capital assets pricing model Question 20Answer a. 0.132 b. 0.143 c. 0.112 d. 0.121
Using the equity asset valuation model (CAPM) equation, determine the required return for the shares of the following companies, if the market return is 7.50% (Rm = 7.50%) and the risk-free asset return is 1.25% (RF = 1.25%). You must show all counts. Stock Beta SKT 0.65 COST 0.90 SU 1.42 AMZN 1.57 V 0.94
The following common stocks are available for investment:a. If you invest 20 percent of your funds in each of the first four securities, and 10 percentin each of the last two, what is the beta of your portfolio?b. If the risk-free rate is 8 COMMON STOCK (Ticker Symbol) BETANanyang Business Systems (NBS) 1.40Yunnan Garden Supply, Inc. (YUWHO) 0.80Bird Nest Soups Company (SLURP) 0.60Wacho.com! (WACHO) 1.80Park City Cola Company (BURP) 1.05Oldies Records, Ltd. (SHABOOM) 0.90percent and the expected return on the market portfolio is14 percent, what will be the portfolio’s expected return?
11. The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. (Tool tip: Mouse over the points in the graph to see their coordinates.)
A $33,622 portfolio is invested in a risk-free security and two stocks. The beta of Stock A is 2.1 while the beta of Stock B is 0.84. One-half of the portfolio is invested in the risk-free security. How much (in $) is invested in Stock A if the beta of the portfolio is 0.56? Answer to two decimals
1. Consider the three stocks in the following table. P, represents price at time t, and Q, represents shares outstanding at time t. Calculate the rates of return on the following indexes of the three stocks: A B с Po 90 50 100 a. A market-value-weighted index. b. An equally weighted index. Qo 100 200 200 P₁ 95 45 110 Q₁ 100 200 200