Q- vipul The resident Economist in the Investment Firm you work for has generated thfollowing expected end-of-year prices for Apple and the market portfolio,conditional on the state of the economy. The market portfolio and Apple areselling for $150 and $40 today.State of the Economy Probability Market Portfolio Apple StockExtreme Growth 0.20206.2546.75Normal Growth0.50156.2552.75Recession0.20112.5058.00Depression0.10100.0059.50Use this information to answer the following questions.Report your answer as a number (Example 1.0).What is the expected return of Apple according to the CAPM if the risk-freerate is 2%?

The capital asset pricing model aids analysts and investors in calculating the expected return on…

Answered: What is the expected return of Apple…

Business

Finance

What is the expected return of Apple according to the CAPM if the risk-free rate is 2%?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 1NIC

See similar textbooks

Similar questions

Considering the world economic outlook for the coming year and estimates of sales and earning for the pharmaceutical industry, you expect the rate of return for Lauren Labs common stock to range between -20 percent and +60 percent with the following probabilities. Probability Possible Returns 0.10 0.13 0.19 0.29 0.27 0.02 Compute the expected rate of retum E(R) for Lauren Labs. Round your answer to four decimal places. -0.20 -0.10 0.20 0.30 0.35 0.60
Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Assume that an individual investor wants to select one market segment for a new investment. A forecast shows improving to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3). What is the preferred market segment for the investor, and what is the expected return percentage? At a later date, a revised forecast shows a potential for an improvement in economic conditions. New probabilities are as follows: improving (0.4), stable (0.4), and declining (0.2). What is the preferred market segment for the investor based on these new probabilities? What is the expected return percentage?
Question is in the screen shot
The following table is an analyst's best guess for the likelihood of various states of the economy next year and the corresponding return on the stock of EFG Corp. State of the Expected Return Economy Probability (%) Ideal 0.2 20.0 Good 0.4 15.0 Fair 0.3 8.0 Poor 0.1 -10.0 What is the expected percentage rate of return on EFG Corp. stock? Group of answer choices 3.4 10.4 10.8 11.4 not enough information
Assume that the economy can experience high growth, normal growth, or recession. Under these conditions, you expect the following stock market returns for the coming year: State of the Economy High Growth Normal Growth Recession Probability 0.2 0.7 0.1 Return 60% 18% 2% a. Compute the expected value of a $1,000 investment over the coming year. If you invest $1,000 today, how much money do you expect to have next year? What is the percentage expected rate of return? Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to one decimal place. The expected value is $ and the expected rate of return is b. Compute the standard deviation of the percentage return over the coming year. Standard deviation = % = %. c. If the risk-free return is 7 percent, what is the risk premium for a stock market investment? Risk premium %
Calculate the intrinsic value of GE in each of the following scenarios by using the three-stage growth model of Spreadsheet in image. Treat each scenario independently. a. The terminal growth rate will be 9.70%. (Round your answer to 2 decimal places.) b. GE’s actual beta is 1.08. (Round your answer to 2 decimal places.) c. The market risk premium is 9.80%. (Round your answer to 2 decimal places.)
Assume that the economy can experience high growth, normal growth, or recession. Under these conditions you expect the following stock market returns for the coming year: State of the Economy High Growth Normal Growth Recession. Probabilities 0.2 0.7 0.1 Return +30% +12% -15% 1. Compute the expected value of a $2000 investment over the coming year. If you invest $2,000 today, how much money do you expect to have next year? 2. Compute the standard deviation of the percentage return over the coming year.
A manager believes his firm will earn a return of 16.35 percent next year. His firm has a beta of 1.13, the expected return on the market is 13.90 percent, and the risk-free rate is 7.90 percent.Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required Return: ___.__% Determine whether the manager is saying the firm is undervalued or overvalued. a.) undervalued b.) overvalued
.An analyst believes that economic conditions during the next year will either be strong, normal, or weak, and she thinks that the Corrigan Company's returns will have the following probability distribution. Conditions Probability (%) Return (%) Strong 30 30 Normal 40 15 Weak 30 -10 What is Corrigan’s expected return? What is Corrigan’s standard deviation of returns?
need help
The Dow Jones Industrial Average had the following annual returns: Year Return 2019 22.3% 2020 7.3% 2021 19% 2022 -8.7% Using just these last 4 years of data, what is the expected return for the Dow Jones? What is the standard deviation of the returns? Please show and explain your work.
Assume that Conrado Corporation is considering the possible rates of return it might earn next year on a P100,000 investment on the stocks of Buenos Aires or a P75,000 on those of Jessa. The future returns 3.2 depend on the state of the economy with their corresponding probability distribution. Stock Jessa Return (r) Stock Buenos Aires State of Economy Bad Probability (p) Probability (p) 20% Return (r) -8% 15% -10% Normal 15% 70% 20% 80% Good 35% 15% 40% 20% 1. What is the Expected Return of Stock Buenos Aires? 2. What is the Expected Return of Stock Jessa? 3. What is the Variance of Stock Buenos Aires? 4. What is the Variance of Stock Jessa? 5. What is the Standard Deviation of Stock Buenos Aires? 6. What is the Standard Deviation of Stock Jessa? 7. What is the Coefficient of Variation of Stock Buenos Aires? 8. What is the Coefficient of Variation of Stock Jessa?