Answered: What is the risk premium for a company…

What is the risk premium for a company that has a yield rate of 6.12% when the risk-free rate is 4.78% ? Select one: a. None of these are correct. b. 10.90% c. 4.78% d. 6.12% e. 1.34%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: 3. Given that the CAPM holds, what is the lowest possible standard deviation for an investor who…

A: Standard deviation is the measure of risk and volatility and is measured as a deviation from the…

Q: о A stock's returns have the following distribution: Demand for the Company's Products Demand…

A: Stock's expected return: 14.40%Standard deviation: 21.05%Coefficient of variation: 1.46Sharpe ratio:…

Q: Assume that you are a consultant to Thornton Inc., and you have been provided with the following…

A: The cost of equity, as defined by the Capital Asset Pricing Model (CAPM), is the expected return…

Q: a) Calculate the expected rate of return, FB, for stock B3 (FA= 14,30%) b) Calculate the standard…

A: Risk and return are essential financial principles. The term “risk” refers to the uncertainty and…

Q: Assume that you are given the following historical returns for the Market and Security J. Also…

A: To find out the expected return of security J for coming year as per CAPM, we are required to find…

Q: Risk-Adjusted Performance Measures Sharpe Ratio Treynor's Measure Information Ratio A 0.4750 -0.0082…

A: Risk adjusted measures are used to determine the reward an investor would get for taking that amount…

Q: Given the following information for ABB Ltd: Risk free rate = 5% p.a. Mark risk premium = 12% Beta…

A: The capital asset pricing model, often known as CAPM, is a kind of financial model that determines…

Q: 11. Consider the same information from the previous question. The price of a six-months forward…

A: Data given: S0=100 R=Risk free rate=(1+0%)=1 u= $110/100=1.1 d=$90/100 =0.9

Q: The Capital Asset Pricing Model asserts that the return is equal to the risk-free rate plus a risk…

A: CAPM return is called as Capital Asset pricing method. It is calculated by using the given below…

Q: Security Sinle-index Model Estimates X Y 2 3 1 Bi 1.5 1.3 0.8 o(e.) 3% 1% 2% Given the data for…

A: Expected Return on each security: E_X = alpha_i + Beta_i*E(r_m) = 2 + 1.5*0.08 = 2.12% Similarly,…

Q: Capital Asset Pricing Model (CAPM) - Risk Free rate Risk free rate (Rf)* Beta (B)* Market risk…

A: Following details are given to us in the question : Beta (B) = 1.10 Market Risk Premium (Rm-Rf) = 7%…

Q: Condition economy Strong Normal Weak Company A Company B of Probability % Return if this return if…

A: Expected returns for an investment refers to the profit that the investors forecasts based on…

Q: Using the table below, calculate the Standard Deviation of the portfolio: Demand for Company…

A: The objective of the question is to calculate the standard deviation of the portfolio given the…

Q: Assume you are given the following information regarding the expected returns for an asset, for…

A: Formulas used: Expected return = Sum of (Probability of state* Return in that state) Standard…

Q: Suppose that a two-factor model, where the factors are the market return (Factor 1) and the growth…

A: PortfolioExpected ReturnSensitivity to Factor 1Sensitivity to Factor 2A0.150.51.5B0.1411C0.0400D10.5

Q: Asset Alps Ness Orange Market sider three assets with the following expected returns and standard…

A: The capital asset pricing model is one of the mathematical models that explain the relationship…

Q: For each 1% change in the market portfolio's excess return, the investment's excess return is…

A: Excess return is determined by deducting the return from on investment from the return percentage…

Q: What is the risk free return?

A: Rate of return is the return percentage which an investor gets from the money which has been…

Q: Which of the following statements is TRUE? O a. A decrease in the inflation rate will lead to an…

A: A security market line, or SML, is a graphical representation of the expected returns a security…

Q: Required Return Beta Risk-Free Rate Market Return A 12.5% 0.90 8% ? B 9.0% 1.3 ? 8% C…

A: The capital asset pricing model (CAPM) describes the relationship between systematic risk ( measured…

Q: Based on the following table, which option gives you highest risk-adjusted returns? Note you don't…

A: a) Sharpe Ratio: Sharpe Ratio is used to measure return earned in excess of the risk-free return per…

Q: The following data have been developed for Ding Corp. State Market Return 1 2 3 4 Probability 0.10…

A: Capital Asset Pricing Model is used to determine the required return on the stock which is risk free…

Q: A high value for the PS ratio is consistent with: Da high value of the levered 8 of equity. a high…

A: PS ratio is used in valuation of stock whether it is undervalued or overvalued.

Q: Asset Expected Return (%) Standard Deviation (%) 1 15 10 20 15 18 20 4 12 10 10 5 14 10 16 20 What…

A: A portfolio is a collection of financial investments such as stocks, bonds, commodities, cash and…

Q: Using the table below, calculate the standard deviation of the portfolio Demand for Company Products…

A: Demand Probability Rate of returnWeak 0.2-30%below average0.1-15%Average0.410%Above…

Q: 30. Systematic versus Unsystematic Risk Consider on Stocks I and II: State of Probability of State…

A: Market risk premium is 7% Risk free rate is 4% To Find: Beta Standard deviation

Q: 1. If the market-risk premium were 4% and a security's beta coefficient were 2.0, what would be the…

A: 1 ) Required rate of return = Risk free + Beta × Risk Premium Risk Free Rate = 6% Risk Premium =…

Q: Risk-free rate is 7% 2. Calculate the required rate of return for A. 1. 8.90% 2. 8.40% 3. 8.70% 4.…

A: Required return is sum product of expected return and respective probability. Required return = ∑p*R…

Q: You have the following information: A B C 2% 3% 1.5 0.5 2 Alpha 1% Beta 2 D -2% Market 0% 1 Res.…

A: The performance of the portfolio can measure by using the 3 different methods as Sharpe ratio, the…

Q: Consider the following scenario analysis:- State of Economy Probability Stocks Bonds Recession…

A: Corporate finance is referred as the decision of the firm to take capital investments and other…

Q: ar Energy Services has a Beta sury bill is currently 4.4% and 0%. What is the market returnE

A: The market return can be calculated as follows :

Q: a 0.07248 b. 0.00386 0.26921

A: Portfolio management is the process of selecting, prioritising, and controlling an organization's…

Q: Consider the following information given to > answer the series of questions below to determine the…

A: Solution:- We know, expected rate of return in case of data (ie. Which involves probability) is the…

Q: CAPM Required Return A company has a beta of .99. If the market return is expected to be 10.4…

A: Required Return: It is the rate of return which is the least satisfactory return an investor may…

Q: you observe the following situation: Security Peat Company Re-Peat Company Beta 1.70 0.85 Expected…

A: As per CAPM,Required return = Rf+[β∗MRP]Where Rf = risk free rateβ = BetaMRP = Market risk…

Q: Which asset would the risk - averse financial manager prefer? (See below.) Asset Initial investment…

A: Risk averse in tendency to avoid risk and take less risk and would like prefer safety of original…

Q: uppose that a two-factor model, where the factors are the market return (Factor 1) and the rowth…

A: As per 2 factor Arbitrage Pricing Theory, Expected Return = Rf + ( b1f1) + (b2f2) Where, Rf = Risk…

Q: Suppose the consumer has a Mean-Variance utility, u(ra, 0₂) = −(9% — rz)² – o², and there are a…

A: The necessary rate of return on an organization's investments to meet the demands of its capital…

Q: A normal yield curve a.has an upward slope b.is a sign of a coming recession c.indicates that the…

A: A normal yield curve is a graphical representation of the relationship between the interest rates of…

Q: beta of OGDCL is reduced to 0.8%, the return on OGDCL will. a.Increase b.No change…

Q: Capital Asset Pricing Model (CAPM) - Risk Free rate Risk free rate (Rf)* Beta (B)* 1.10 Market risk…

A: In this question we require to compute the Risk free rate (Rf) from the below given details: Beta =…

Q: 7. Factors that impact the yield curve Aa Aa There are three factors that can affect the shape of…

A: Answer 1:“Upward-sloping yield curve”Justification: Since the real risk-free rate and the inflation…

Q: In 2018, Pyle Hospital received a $250,000 pure endowment grant. Also in 2018, Pyle’s governing…

Q: Date 8/1/23 Adj Date TSLA Return AMZN Return MCD Return Risk-Free S&P 500 Return TSLA excess r AMZN…

A: TSLA return-3.50%AMZN return3.24%MCD return-3.63%Risk free0.45%S&P return-4.87%

Question

100%

What is the risk premium for a company that has a yield rate of 6.12% when the risk-free rate is 4.78% ?

Select one:

a. None of these are correct.

b. 10.90%

c. 4.78%

d. 6.12%

e. 1.34%

AI-Generated Solution

AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.

Unlock instant AI solutions

Tap the button
to generate a solution

Click the button to generate
a solution

SEE SOLUTION

Similar questions

What are the excessRates?
If a company has a rating of BB+/Ba1, it is considered: Question options: moderate yield High grade low yield Performance grade Investment grade High yield Question 16
QUESTION 11 Which of the following factors comprise the CAPM? I. dividend yield II. risk-free rate of return III. the expected rate of return on the market IV. risk premium for the firm I and III only II and IV only III and IV only II, III and IV only
The lowest rate of return possible is:a. 0%b. -∞c. -100%d. the company’s MARR
Answer question in the image.
Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% Q) If you are only willing to make an investment with a standard deviation of 7.0%, is it possible for you to earn a return of 7.0%?
2
use attachment to answer questions This question relates to Diagram 1 from the 9.4 diagrams, which shows the Security Market Line. What is the expected return on the market? Select one: a. 20% b. 10% c. 15% d. 5%
If a company has a rating of BB+/Ba1, it is considered: Question 12 options: moderate yield High grade low yield Performance grade Investment grade High yield
The effective convexity of with a high price of $100.73, a low price of $99.24, and a current price of $99.88 given a 600bps change in yield curve is closest to A. -555 B. -198 C. -33 D. Not enough information
Q15 The rate which considers the riskiness and available returns on the investments is known as a. Constant Dividend b. Maximum rate of return c. Minimum acceptable rate of return d. Constant Yield
The.. value.. of.. an.. ordinary.. share..Select one or more:a. Will fall if future profit forecasts are higher than expectedb. Is always at its fundamental valuec. Can rise and fall along with market sentimentd. Will rise if a firm introduces some cost saving innovation