Use the following information to answer the question(s) below.ExpectedLiquidatingDividendMarketStockCapitalizationBetaTaggart Transcontinental$800$9201.10Rearden Metal$600$7201.20Wyatt Oil$1000$11000.80Nielson Motors$400$5001.40All amounts are in millions.If the risk - free rate is 3% and the market risk premium is 5%, then the CAPM's predicted expected return for Nielson Motors is closest to:A. 10.0%O B. 9.0%Oc. 9.5%O D. 8.5%

Beta of Nielson motors (B) = 1.40 Risk free rate (RF) = 3% Market risk premium (RP) = 5%

Use the following information to answer the question(s) below. Expected Liquidating Dividend $920 Market Stock Capitalization $800 Beta Taggart Transcontinental Rearden Metal 1.10 $600 $1000 $400 $720 $1100 $500 1.20 Wyatt Oil 0.80 Nielson Motors 1.40 All amounts are in millions. If the risk - free rate is 3% and the market risk premium is 5%, then the CAPM's predicted expected return for Nielson Motors is closest to: A. 10.0% O B. 9.0% OC. 9.5% O D. 8.5%

Use the following information to answer the question(s) below. Expected Liquidating Dividend $920 Market Stock Capitalization $800 Beta Taggart Transcontinental Rearden Metal 1.10 $600 $1000 $400 $720 $1100 $500 1.20 Wyatt Oil 0.80 Nielson Motors 1.40 All amounts are in millions. If the risk - free rate is 3% and the market risk premium is 5%, then the CAPM's predicted expected return for Nielson Motors is closest to: A. 10.0% O B. 9.0% OC. 9.5% O D. 8.5%

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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You have assigned the following values to these three firms: US Bancorp Praxair Eastman Kodak Price $34.55 37.80 50.35 Upcoming Dividend $ 2.35 1.36 2.00 US Bancorp required return Praxair required return Eastman Kodak required return Growth CAPM 6.20% Assume that the market portfolio will earn 13.30 percent and the risk-free rate is 6.00 percent. Compute the required return for each company using both CAPM and the constant-growth model. Note: Do not round intermediate calculations and round your final answers to 2 decimal places. 0.18 X % 0.24 X % 0.11 % 13.50 13.80 X Answer is complete but not entirely correct. Beta 1.67 2.49 0.64 Constant-Growth Model 0.16 X % 0.18% 0.17
Let's value a REIT using Net Asset Value another way. (All values are in Millions) Assume a REIT has debt of 1,000M, there are 100M shares outstanding, both the stock price and NAV/share equal $5, and a fair cap rate for the portfolio is 10.0%, what is the implied NOI? $100M $105.5M $101 M $150M
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EXCEL PROJECT AND EXCEL SOLUTION Consider the following stocks, all of which will pay a liquidating dividend in a year and nothing in the interim: Stock A Stock B Stock с Stock D Market Capitalization (5 million) 800 750 950 900 Expected Liquidating Dividend ($ million) 1000 1000 1000 1000 Beta PLEASE SHOW SOLUTIONS IN EXCEL 0.77 1.46 1.25 1.07 a. Calculate the expected return of each stock. b. What is the sign of correlation between the expected return and market capitalization of the stocks? In Problem 20, assume the risk-free rate is 3% and the market risk premium is 7%. a. What does the CAPM predict the expected return for each stock should be? b. Clearly, the CAPM predictions are not equal to the actual expected returns, so the CAPM does not hold. You decide to investigate this further. To see what kind of mistakes the CAPM is making, you decide to regress the actual expected return onto the expected return predicted by the CAPM.49 What is the intercept and slope coefficient of…
3. Capital Asset Pricing Model A. Suppose you invest $400,000 in Treasury Bills that have a yield to maturity of 4% and $600,000 in the market portfolio with an expected return of 14%. What is the expected return on your portfolio? Please show and explain. B. Given the information in part (A), what is the required expected return for an investment in a stock that has a beta of 0.7? Please show and explain.
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Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 0.173687 ETFCDA : E(r)= 0.073763 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 Answer the following questions using Excel: What is the optimal portfolio of ETFUS and ETFCDA? Also submit an Excel file to show your work.
Assume Merck (MRK) just finished paying an annual dividend of $2.1 (for 2019). You look up their beta and it equals 0.34 , implying it's much less risky than the market portfolio. The current risk free rate equals 1.96 %. Assume a market risk premium of 9.9 %. Merck's current stock price is $79. Assuming investors expect Merck to grow at a constant rate in perpetuity, what is that growth rate expectation? (write this number as a decimal and not as a percentage, e.g. 0.11 not 11%. Round your answer to three decimal places. For example 1.23450 or 1.23463 will be rounded to 1.235 while 1.23448 will be rounded to 1.234)
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