Chapter 22

Assume the expected return on the market is 7 percent and the risk-free rate is 4 percent. a. What is the expected return for a stock with a beta equal to 1.10? (Enter your answers in decimals. Do not enter percent values.) b. What is the market risk premium? (Enter your answers in decimals. Do not enter percent values.)

Please show all steps in excel.

Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rf. The characteristics of two of the stocks are as follows: Correlation = -1 Stock Rate of return B O Yes ● No Expected Return Required: a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be formed to create a "synthetic" risk-free asset?) (Round your answer to 2 decimal places.) % 6% 12% Standard Deviation 25% 75% b. Could the equilibrium rf be greater than rate of return?

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Please show working   Please answer ALL OF QUESTIONS 1 AND 2 1. Assume that the risk-free rate is 3.5% and the market risk premium is 8%. a. What is the required return for the overall stock market? Round your answer to two decimal places. __________ %  b. What is the required rate of return on a stock with a beta of 2.4? Round your answer to two decimal places. __________ %   2. An individual has $50,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 2.0. If these are the only two investments in her portfolio, what is her portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places._______

answer each part correctly PLEASE.

Instruction: Complete ALL questions.Question 1A. Use an example to explain the relationship among total, systematic and unsystematic risks. B. Stocks RJR Limited and SJL Limited have the following probability distributions of expected future returns: Probability                                       RJR Limited                SJL Limited           0.1                                             -10%                           -27.5%           0.2                                            2%                                   4%           0.4                                            12%                                 18%           0.2                                            20%                                  22.5%           0.1                                            39%                                 32.5%Calculate, for stocks RJR and SJL, the:i. expected rate of return. ii. standard deviation. iii. coefficient of variation.  C. Which stock should a potential investor opt…

Please first fill in the spaces in the following table by assigning probabilities foreach scenario and assigning returns for stocks A and B, depending on your own choice. (The useof same probabilities and return data by different students will be treated as a cheat attempt andwill be penalized severely). Then, solve the following questions.Scenario Probability RA (%) RB (%)RecessionNormalBoom a) What is the expected return for Stock A (E(RA))?b) What is the expected return for Stock B (E(RB))?c) What is the covariance between the returns of Stock A and B?

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1. A stock with a beta of zero would be expected to have a rate of return equal to a. the risk-free rate b. the market risk premium c. zero d. the market rate of return   2. If an individual stock's beta is higher than 1.0, that stock is: a. riskier than the market. b. always the most attractive to investors. c. less risky than the market. d. exactly as risky as the market.   3. If Brewer Corporation's bonds are currently yielding 8% in the marketplace, why is the firm's cost of debt lower? a. Market interest rates have increased. b. Additional debt can be issued more cheaply than the original debt. c. Interest is deductible for tax purposes. d. There should be no difference; cost of debt is the same as the bonds' market yield.

1. Risk free rate represents: a. The market rate of return b. The rate provided by long term government securities c. Beta d. The rate provided by short term government securities   2. The market risk premium is measured by: a. T-bill rate. b. market return less risk-free rate. c. beta. d. standard deviation.   3. A stock with a beta of one would be expected to have a rate of return equal to a. the market risk premium b. the risk-free rate c. the market rate of return d. zero

vi. Subject:- Accounting

. The market value of common stock IS primarıly based on A. the firm's future earnings C. Total assets. B. Book value. D. retained earmings 8. AT-bill pays 5 percent rate of return. Would risk-averse investors invest inarisky portfolio that pays 8 percent with a probability of 40 percent or 3 percent with a probability of 60 percent? A. Yes, because they are rewarded with a risk premium. B. No, because they are not rewarded with a nisk premium. C. No, because the risk premium is smal D. Cannot be determined. e. None of the above. 9. A firm has a P/E ratio of 18 and a ROE of 13% and a market to book value of A.0.64 B. 0.92 C. 2.34 D. 1.56 E. none of the above 10. Your opinion is that security A has an expected rate of return of 0.125. It has a beta of 1.5. The risk-free rate is 0.04 and the market expoctod rate of return is 0.11. According to the Capital Asset Pricing Model, this security is A. Underpriced. D. cannot be determined from data provided. C. fairly priced. E.…

Please do both questions    QUESTION 1 Assume the following data for a stock: beta = 0.9; risk-free rate = 4 percent; market rate of return = 24 percent; and expected rate of return on the stock = 23 percent. Then the stock is:     correctly priced.     overpriced. this is the wrong answer     underpriced.     The answer cannot be determined. QUESTION 2 Assume the following data for a stock: beta = 1.5; risk-free rate = 8 percent; market rate of return = 18 percent; and expected rate of return on the stock = 22 percent. Then the stock is:     overpriced.     underpriced. this is the wrong answer     correctly priced.     cannot be determined

ANSWER QUESTION 5 ONLY. #5: Can you tell from the data below which stock's return has the highest correlation with the return of the market portfolio? CLUE: Involves how beta is calculated and Covariance. #1 answer: Expected Return on Risk Free Asset(RF)= 0.02 OR 2% #2 answer: Expected Return for the market portfolio = 10% #3 answer: Expected Return of Stock E = 0.1400 Expected Return of Stock F=0.1888 Expected Return of Stock G=0.220 #4 Answer: EXpected Return of Stock H = 22.8%

PLEASE ANSWER EACH PART CORRECTLY PLEASE!! go over

QUESTIONS: 1) Assuming that the risk-free rate of return is currently 3,2%, the market risk premium is 6% whereas the beta of HelloFresh SH. stock is 1.8, compute the required rate of return using CAPM. 2) Compute the value of each investment based on your required rate of return and interpret the results comparing with the market values. 3) Which investment would you select? Explain why using appropriate financial jargon (language). 4) Assume HelloFresh SH's CFO Mr. Christian Gaertner expects an earnings upturn resulting increase in growth (rate) of 1%. How does this affect your answers to Question 2 and 3? 5) AACSB Critical Thinking Questions: A) Companies pay rating agencies such as Moody's and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the first place; doing so is strictly voluntary. Why do you think they do it? (Textbook page: 198) B) What are the difficulties in using the PE ratio to value stock?…

Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.70 1.39 a. Expected return on market b. Risk-free rate Expected Return .180 .153 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % %

A stock has a required return of 15%, the risk-free rate is 7.5%, and the market risk premium is 5%. a. What is the stock's beta? Round your answer to two decimal places. 0.85 b. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. I. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. III. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. IV. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.…

PLs refer to attached image. Pls show formula and solution not in spreadsheet form,

If Stock Z is correctly priced, you can infer that the expected market return is ____%. Do not round any intermediate work, but round your final answer to 2 decimal places (example: enter 12.34 for 12.34%).  Do not enter the % sign. Margin of error for correct responses: +/- .05               expected return (implied by market price)      Beta     Stock Z 12% 1.48     T-bonds 5%

A stock has a required return of 8%, the risk-free,rate is 3.5%, and the market risk premium is 2%. a. What is the stock's beta? Round your answer to two decimal places. b. If the market risk premium increased to 5%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. 1. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium. III. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. IV. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. V.…

The rate of return on the market stock index is 13 percent. The rate of return on a risk-freebank account is 1%. The B (beta) of stock XYZ is 1.5. Use the data to answer the questionsbelow.a. What is the market risk premium? Show your work.b. What is the cost of equity for XYZ? Show your work.c. What is the stock XYZ risk premium? Show your work.d. Draw the graph of the Security Market Line and show the stock of XYZ on the graph.The end-of-year dividend on stock ABC is expected to be $0.8. The growth rate of dividend isexpected to be 5 percent for ever. The current price of the ABC stock is $10. Use the data toanswer the questions below.e. What is the cost of equity for stock ABC? Show your work.f. Suppose stock KLM has the same end-of-year dividend, dividend growth rate andprice as stock ABC, but the risk of KLM stock is much greater than of the ABC stock.What is your estimate of the cost of equity of stock KLM using the method at part e?Do you agree with the valuation of the cost of…

kindly be as detailed as possible with the calculations. Preferably in excel.

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please help someone!!

Start with A-C and I will submit seperately for D! Thank you :)

Ο A stock has a required return of 16%, the risk-free rate is 5.5%, and the market risk premium is 4%. a. What is the stock's beta? Round your answer to two decimal places. b. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. I. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. II. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. III. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. IV. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk…

Already have answers for A-C, just need D. Thank you! :)

Scenario 2: The following table shows the returns for the market index (Market - M) and the returns for two stocks (Asset X & Y) under three scenarios. Assume each scenario has an equal chance of occurring (33%). Bad Okay Good Market - M-5% 5% 15% Asset - X -2%-3% 25% Asset - Y -4%-6% 30% What is the correlation of "Asset - Y" to "Market M"? enter your number to two decimal places without the percent sign. Example 23% enter as .23.

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