The risk-free
- What should be the market price of the stock?
$
- If the current market price of the stock is $91.00, what should you do?
The stock -Select-shouldshould notItem 2 be purchased.
- If the expected return on the market rises to 13.1 percent and the other variables remain constant, what will be the value of the stock?
$
- If the risk-free return rises to 4.5 percent and the return on the market rises to 13.9 percent, what will be the value of the stock?
$
- If the beta coefficient falls to 1.2 and the other variables remain constant, what will be the value of the stock?
$
- Explain why the stock’s value changes in c through e.
The increase in the return on the market -Select-increasesdecreasesItem 6 the required return and -Select-increasesdecreasesItem 7 the value of the stock.
The increase in the risk-free rate and the simultaneous increase in the return on the market cause the value of the stock to -Select-increasedecreaseItem 8 .
The decrease in the beta coefficient causes the firm to become -Select-lessmoreItem 9 risky as measured by beta, which -Select-increasesdecreasesItem 10 the value of the stock.
Step by step
Solved in 4 steps
