Question 4You are analyzing a stock with a beta of 3. The risk free rate of interest is 11 percent and the expected return on the market is 16 percent. What is the market risk premium?O 5%O 15%O -5%O 8%O None of the listed items is correctA Moving to another question will save this response.MacBook Airescra%23$4%QWERASDFG

Beta = 3 Risk Free Rate = 11% Expected Return on market = 16% Market Risk Premium = ?

You are analyzing a stock with a beta of 3. The risk free rate of interest is 11 percent and the expected return on the market is 16 percent. What is the market risk premium? 5% 15% 5% 8% None of the listed items is correct A Moving to another question will save this response.

You are analyzing a stock with a beta of 3. The risk free rate of interest is 11 percent and the expected return on the market is 16 percent. What is the market risk premium? 5% 15% 5% 8% None of the listed items is correct A Moving to another question will save this response.

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

See similar textbooks

Related questions

Q: A stock has a required return of 8%, the risk-free,rate is 3.5%, and the market risk premium is 2%.…

A: Required return: 8%Risk free rate: 3.5%Market risk: 2%a. Beta=(Required return-Risk free rate) /…

Q: You are exploring the use of APT in making investment choices. You have identified three factors…

A: The APT Theory is used to find out the return of the stock based on the relation between the factors…

Q: The slope of the characteristic line of a security is that security's Beta. Select one: O True O…

A: Stock refers to the smallest unit of the total number of shares that are being issued by the public…

Q: A stock with a beta of 0.8 is _______ risky than the market and will _______ when the market…

A: Beta is a statistical indicator that shows how the price of a specific stock or group of stocks…

Q: stock has a required return of 8%, the risk-free rate is 3.5%, and the market risk premium is 3%. a.…

A: CAPM is an abbreviation used for Capital asset pricing model. This model is used to determine the…

Q: The risk-free rate is 3.4 percent and the market expected return is 11.9 percent. What is the…

A: In the given case, we have provided the risk free rate , beta of a stock and the expected market…

Q: a. Calculate the beta of each stock. (Do not round intermediate calculations and round your answers…

A: Systematic risk is the total risk resulting from global events such as political upheaval or changes…

Q: Suppose that you are allowed to invest your money only in one stock. Which one of the two stocks in…

A: A better investment stock refers to a stock that has a higher potential for generating favorable…

Q: Stock Y has a beta of 1.40 and an expected return of 15.2 percent. Stock Z has a beta of .85 and an…

A: The expected rate of return on an investment with no default risk is known as the "risk-free rate."…

Q: 1.25

A: Please note that as per Bartleby answering guidelines, we are allowed to answer only first 3…

Q: You have been looking for stocks that are "good values" and have calculated expected returns for…

A: Risk free rate = 7% Market risk premium = 2%

Q: You think MBB stock has potential for an upward move in price. You have no position whatsoever in…

A: Financial derivatives known as call options and put options provide the holder the right, but not…

Q: You are exploring the use of APT in making investment choices. You have identified three factors…

A: APT model is used to find out the relation between the expected return of the stock and the…

Q: QUESTION 6 The risk-free rate is 5%. The expected market rate of return is 13%. If Stock A which has…

A: Capital Asset Pricing Model (CAPM) helps to find out the expected return of individual security or…

Q: You have been provided the following information as part of a consultation query: The risk free rate…

A: According to the CAPM method, the formula for calculation the required rate of return is: Required…

Q: A stock has a beta of 1.12, the expected return on the market is 10 percent, and the free rate is 3…

A: In this we have to use capital assets pricing formula for calculation of expected return.

Q: Please help me with 11-5 ??‍♀️

Q: The risk-free rate is 3.1 percent and the market expected return is 12.2 percent. What is the…

A: Risk free rate = rf = 3.1%Market return = mr = 12.2%Beta = b = 1.16

Q: 1. Stock B has a beta of 1.2 and a return of 13.1%. Stock D has a beta of 0.8 and a return of 11.0%.…

A: The CAPM model will be used here. CAPM stands for Capital Asset Pricing Model. As per the CAPM model…

Q: A stock has a required return of 7%, the risk-free rate is 2.5%, and the market risk premium is 3%.…

A: Required rate of return as per CAPM :— Expected Return = Rf + (Rm - Rf) beta of the…

Q: Consider the CAPM. The expected return on stock a with a beta of 1.5 is 26% The stock with a boto

A: CAPM is the capital assets pricing model which gives the required rate of return based on the beta…

Q: efficient of variation. Do not round intermediate calculations. Round your answers to two decimal…

A: The market risk premium, often referred to simply as the "risk premium," is a key concept in finance…

Q: A certain stock has a beta of 1.3. If the risk-free rate of return is 3.9 percent and the market…

A: Expected return on a stock implies the returns expected on a stock after taking into consideration…

Q: You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a…

A: Since equally invested in risk free asset and 2 stocks Total no. of stocks in the portfolio = 3…

Q: 4. Suppose risk-free rate of return = 2%, market return = 7%, and Stock B’s return = 11%. a.…

A: Using CAPM

Q: places. If the market risk premium increased to 9%, what would happen to the stock's required rate…

A: According to CAPM Required rate =Risk free rate +Beta x market risk premium

Q: answer each part correctly PLEASE.

A: Capital asset pricing model (CAPM) is a tool used to measure the expected return on an investment.…

Q: V3. By looking at the sensivities of your portfolio to δs = -$2 and δσ = -1%, you decide to hedge…

A: The degree of uncertainty and/or potential financial loss associated with an investment choice are…

Q: A stock has a beta of 1.24 and an expected return of 12.2 percent. A risk-free asset currently earns…

Q: You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a…

A: Beta of portfolio comprising of risk free asset and two stocks is computed as follows:-Bp = (wr*Br)…

Q: You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a…

A: Since equally invested in risk free asset and 2 stocks Weight of each stock=(1/3)

Q: Stock R has a beta of 1.4, Stock S has a beta of 0.95, the expected rate of return on an average…

A: The required return of the stock is calculated using the Capital asset pricing model(CAPM ). The…

Q: Suppose that the Tbill rate is 3% and the expected return on the market is 9.5%. Consider the…

A: Alpha is the difference between the actual return of the portfolio and the expected risk adjusted…

Q: Stock A has a beta of 1.5 and Stock B has a beta of 0.8. Which of the following statements is most…

A: Beta is an important measure of risk used to evaluate stocks. It is a measure of a stock's…

Q: A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset currently earns…

A: Beta of portfolio = 2.41Stock beta = 1.21Stock A expected return = 11.9%Risk-free asset return =…

Q: Required Rate of Return Stock R has a beta of 1.8, Stock S has a beta of 0.35, the expected rate of…

A: Beta coefficient shows the systematic risk of the assets. The beta factor shows the systematic risk…

Q: Your client is considering purchasing stocks. The actual return of one o his choices follows here.…

A: Standard Deviation: It represents a measure of the dispersion of the data set that is in relation…

Q: Consider the following two scenarios for the economy and the expected returns in each scenario for…

A: Beta is a measure of the volatility of a stock's price relative to the market. A beta of 1 means…

Q: Assume that the CAPM is a good description of stock price returns. The market expected return is 7%…

A: To calculate the alpha of each stock, use the Capital Asset Pricing Model (CAPM). The formula for…

Q: Mulherin's stock has a beta of 1.34, its required return is 8.33%, and the risk-free rate is 2.30%.…

A: Beta = b = 1.34Required Return = r = 8.33%Risk free rate = rf = 2.30%

Q: If the investor desires less risk than the market, he or she: A) buys stocks with alphas of zero. B)…

A: Beta represents market risks.If for a stock, Beta<1 ,then stock is less volatile to market…

Q: A stock has a required return of 16%, the risk-free rate is 5.5%, and the market risk premium is 4%.…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: he risk-free rate of return is 1 percent, and the expected return on the market is 8.7 percent.…

A: Shares are valued using a method called the dividend discount model. This model is based on the…

Q: You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a…

A: Formula Portfolio beta = (Weight of stock 1*Beta of stock 1)+(Weight of stock 2*Beta of stock 2)…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Inputs

VIEW

Answer

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Suppose you have the following information concerning a particular options.Stock price, S = RM 21Exercise price, K = RM 20Interest rate, r = 0.08Maturity, T = 180 days = 0.5Standard deviation,= 0.5 a. What is correct of the call options using Black-Scholes model? * Look for N(d1) and N(d2) from the cumulative standard normal distribution table:
Parts A-C have already been answered, looking for answer D.
In an environment with risk-free rate of zero, if Stock A has return of 10% and Beta of 1.0 and stock B has return of 8% with Beta of 0.5, find a zero-beta portfolio and state its return. [Note a negative amount indicates short-selling, which we assume is allowed here] Question 8 options: 67% in A, 33% in B; -3% -50% in A, 150% in B; 1% -100% in A, 200% in B; 6% 0% in A, 100% in B; 8%
U Assume CAPM holds. We know expected return and beta of two stocks: Stock A: E[ra] = 10% and beta_a = 1.5 Stock B: E[rb] = 5% and beta_b = 0.5 What would be the expected return of a stock that has a beta of 0.9? O 6.5% Ⓒ7% O 7.5% O 6% Question 5 Which of the following statements is false? o The CAPM follows from equilibrium conditions in a frictionless mean-variance economy with rational investors According to CAPM, everyone should hold a mix of the market portfolio and the risk-free asset. According to CAPM, everyone can generate positive return by buying positive alpha stocks and by selling negative alpha stocks. According to CAPM, the expected return on a stock is a linear function of its beta.
When the return on the market portfolio goes up by 5%, the return on Stock A goes up onaverage by 8% and when the market portfolio return goes down by 5%, Stock A return goes down by 6%.a) Calculate the beta of this stock.b) Assuming that CAPM holds, calculate the required rate of return on this stock by assigning values forthe risk-free rate and the expected return on the market portfolio depending on your own choice. (The useof the same risk-free rate and market return by different students will be treated as a cheat attempt).
Stock A's stock has a beta of 1.30, and its required return is 13.75%. Stock B's beta is 0.80. If the risk-free rate is 2.75%, what is the required rate of return on B's stock? Do not round your intermediate calculations.
Stock A has a beta of 1.30, and its required return is 11.35%. Stock B's beta is 0.80. If the risk-free rate is 2.90%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Do not round your intermediate calculations. a. 8.10% b. 6.50% c. 7.56% d. 8.45% e. 8.77%
Please do stepwise and correct please ill like.. pls correct
Heer Don't upload any image please
You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.16 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Beta
Required Rate of Return Stock R has a beta of 1.3, Stock S has a beta of 0.75, the expected rate of return on an average stock is 9%, and the risk-free rate is 5%. By how much does the required return on the riskier stock exceed that on the less risky stock? Do not round intermediate calculations. Round your answer to two decimal places.
Consider the following table, which gives a security analyst’s expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return Aggressive Stock Defensive Stock 1 0.5 6% 2.0% 5.0% 2 0.5 20 32 15 If the T-bill rate is 7%, what are the alphas of the two stocks? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS