You have risen through the ranks of a coffee comany, from the lowly green-apron barista to the coveted black apron, and all the way to CFO. A quick internet check shows that your company's beta is 0.68. The risk-free rate is 5.8% and you believe the market risk premium to be 5.7%. What is your best estimate of investors' expected return on your company's stock (its cost of equity capital)? The expected return is %. (Round to two decimal places.)

You have risen through the ranks of a coffee comany, from the lowly green-apron barista to the coveted black apron, and all the way to CFO. A quick internet check shows that your company's beta is 0.68. The risk-free rate is 5.8% and you believe the market risk premium to be 5.7%. What is your best estimate of investors' expected return on your company's stock (its cost of equity capital)? The expected return is %. (Round to two decimal places.)

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 risen through the ranks of a coffee company, from the lowly green-apron barista to the coveted black apron, and all the way to CFO. A quick internet check shows that your company's beta is 0.68. The risk-free rate is 6% and you believe the market risk premium to be 5.6%. What is your best estimate of investors' expected return on your company's stock (its cost of equity capital)? ..... The expected return is %. (Round to two decimal places.)
Assume that most of the investors in the stock market are active in an online chat group.As one of the investors holding ABC shares, you find out that the ABC stock has an expected return of 9.8% from the perspective of most investors in the chat group.In addition, you gathered the following information by carrying out market research. In your research, the market return is 6.8% and the risk-free rate is estimated to be 3%. The beta and past 1-month variance of Stock ABC is 1.2 and 7.8% respectively. The stock price exhibits an upward trend last week. Should you buy or sell Stock ABC if CAPM is correct? Why?
You have been asked to calculate the required return for a stock that you are considering investing in. You recently looked up the risk-free rate (as measured by Treasury bonds) and found it to be 1%. You also looked up the current market return of the S&P 500 and found it to be 12. If the firm has a beta of 1.2, what is its required return?
Stan is expanding his business and will sell common stock for the needed funds. If the current risk-free rate is 2.9% and the expected market return is 12.5%, what is the cost of equity for Stan if the beta of the stock is a.0.72, b.0.86,
You work as an economic analyst for an investment firm. You believe there are four possible states for the economy over the next year: Boom, Good, Poor, Bust. Your colleague Tosha has estimated the returns for three stocks based on those four scenarios. One of your clients has a portfolio that is 20.00% invested in Stock A and 30.00% invested in Stock C. The rest of your client's portfolio is invested in Stock B. Use the information below to calculate the expected return, variance, and standard deviation on your client's portfolio. 1. First fill in the missing probability and portfolio weight (cells D19 and F22). 2. Calculate the actual return for the portfolio in each state. 3. Use those portfolio returns and the probabilities to calulcate the portfolio's expected return using the SUMPRODUCT function. 4. Calculate the squared deviation from the mean for each state of the economy. 5. Use the SUMPRODUCT function to get the variance (the probability weighted average of the squared…
Choose one appropriate statement. 1. The movement of stock prices have certain patterns, and investors can make profits by studying such patterns. 2. If a hedge fund manager believes that Toyota will going to outperform Honda she will short stocks of both companies. 3. When one share of Apple stock is being traded at $150, the stock market believes that you can always sell a share of Apple stock for at least $150 in the future. 4. O An undervalued stock should outperform the market in the long run. 5. O Diversification is not appropriate because it would prevent investors from capitalizing on the superior return that can result from a concentrated holding of the stock of one successful company.
Some investors use the Sharpe ratio as a way of comparing the benefits of owning shares of stock in a company to the risks. The Sharpe ratio of a stock is defined as the ratio of the difference between the mean return on the stock and the mean return on government bonds (called the risk-free rate rf ) to the SD of the returns on the stock. The mean return on government bonds is rf = 0.03% per day. The table below describes the daily return of three stocks. Date APPLE. TESLA GM 01/10/20 0.85% 4.46% 2.67% 02/10/20 -3.23% - 7.38% 0.26% 05/10/20 3.08% 2.55% 1.64% 06/10/20 -2.87% -2.75% -1.81% 07/10/20 1.70% 2.73% 4.01% 08/10/20 -0.10% 0.15% 1.87% 09/10/20 1.74% 1.90% -0.16% 12/10/20 6.35% 1.91% 0.16% 13/10/20 -2.65% 0.98% -1.06% 14/10/20 0.07% 3.28% -0.63% 15/10/20 -0.40% -2.69% 2.90% 16/10/20 -1.40% -2.05%…
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CAN I GET HELP as soon as possible please Explain your answer for each of them. Show all your work. The required return on ABC stock is 14%. The risk-free rate of return is 4% and the real rate of return is 2%. How much are investors requiring as compensation for risk? A) 8% B) 10% C) 12% D) 14% The efficient market hypothesis suggests thatA) investors should not try to outguess the market by constantly buying and selling securities. B) investors do better on average if they adopt a "buy and hold" strategy.C) buying into a mutual fund is a sensible strategy for a small investor.D) all of the above are sensible strategies.E) only A and B of the above are sensible strategies.
About market efficiency, which of the following statements is right:a. In a highly efficient stock market, it is almost impossible for an investor to make profit from the stock market.b. In a highly efficient stock market, some smart investors can definitely beat the market even without the inside information. c. An investor can make profit by buying the stock of free Inc. since it just reported that the half-year profit doubled with respect to that during the same period in the last year. d. The stock prices of big companies are closer to their intrinsic values than those of small companies since more people follow those big companies, whereas few people follow those small companies.
You have risen through the ranks of a coffee comany, from the lowly green-apron barista to the coveted black apron, and all the way to CFO. A quick internet check shows that your company's beta is 0.51. The risk-free rate is 3.3% and you believe the market risk premium to be 5.8%. What is your best estimate of investors' expected return on your company's stock (its cost of equity capital)? The expected return is %. (Round to two decimal places.)

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