ASsume the following data for a stock: Beta 15, risk-free rate = 4 percent, market rate of return 12 percent, and expected rate of return on he stock 15 percent. Then the stock is

Q: A stock has the following probability distribution: If economy is good (the probability is 20%), its…

A: The Expected rate of return is the total return expected by the investor under different situations…

Q: Assume that the risk-free rate is 7.5% and the required return on the market is 11%. What is the…

A: Risk free rate = 7.5% Market return = 11% Beta = 2

Q: A stock has a required return of 11%, the risk-free rate is 6%, and the market risk premium is 3%.…

A: CAPM states:Re = Rf + B (MRP)Required return =11% Risk free rate= 6% Market risk premium =3%

Q: Assume that the risk-free rate is 3.5% and the expected return on the market is 10%. What is the…

A: Details given to us are : Risk free rate = 3.5% Expected return on market = 10% Beta = 0.7 We need…

Q: The expected return for a stock, calculated using the CAPM is 13.5%. The risk free rate is 7.5% and…

A: In the given problem we are required to calculate the implied return on market using following…

Q: The expected return on the market is 15% and the risk-free rate of return is 5%. If the Beta of the…

A: In given question we need to compute the expected rate of return for stock using CAPM.

Q: Assume that the risk-free rate is 4.5% and the required return on the market is 11%. What is the…

A: Calculation of required rate of return on stock

Q: Suppose the risk-free return is 4.0% and the market portfolio has an expected return of 10.0% and a…

A: Expected return can be calculated by using CAPM equation given below Expected return =Risk free…

Q: A stock has an expected return of 15 percent, its beta is 0.9, and the risk-free rate is 6 percent.…

A: Given the following information: Expected return on stock (r) = 15% Beta (b) = 0.9 Risk free rate…

Q: Demeter Designs stock has a beta of 0.68, the risk free rate is 1.85%, and the expected return on…

A: As per CAPM Ri = Rf + B (Rm - Rf) Where Ri = Return on equity Rf = Risk free rate of return B = Beta…

Q: Suppose the risk-free return is 7.9% and the market portfolio has an expected return of 11.5% and a…

A: Risk free rate = 7.9% Stock beta = 0.77 Market return = 11.5%

Q: A stock has an expected return of 13.1 percent, its beta is 1.70 and the risk free premium rate is…

A: Risk market return is used in CAPM model to calculate expected return on the stock and it is also…

Q: JaiLai Cos. stock has a beta of 0.8, the current risk-free rate is 6.2 percent, and the expected…

A: The provided information are: Beta = 0.80 Expected return = 12% Risk free rate = 6.2%

Q: Assuming that the CAPM approach is appropriate, compute the required rate of return for each of the…

A: Given: Risk free rate = 0.07 Market rate = 0.13 Different betas:

Q: Using the single index model, what is the alpha of a stock with beta of 1.5, a market return of 14%,…

A: As per CAPM Expected return = Risk free rate + ( Market return - Risk free rate ) * Beta Alpha =…

Q: A stock has an expected return of 13.1 percent, a beta of 1.28, and the expected return on the…

A: Given details are : Expected return on stock = 13.1% Beta = 1.28 Expected market return (Rm) = 11%…

Q: An analyst has modeled the stock of a company using a FamaFrench three-factor model and has…

A: Computation of predicted Return and unexplained Return is shown below: Hence, predicted return is…

Q: Assume that the risk-free rate is 7.5% and the required return on the market is 13%. What is the…

A: CAPM describes the relationship between systematic risk and expected return for assets, particularly…

Q: Assume that the risk-free rate is 2.5% and the required return on the market is 13%. What is the…

A: Capital Asset Pricing Model (CAPM) is a fundamental portfolio and security selection model , to find…

Q: A stock has the following projected rates of return (outcomes): 10%, 15%, and 30%. The probabilities…

A: Formulas:

Q: According to the CAPM, what is the required rate of return for a stock with a beta of 0.7, when the…

A: To calculate the required rate of return we use the below formula   Required rate of return = Risk…

Q: Adam wants to determine the required return on a stock portfolio with a beta coefficient of 0.5.…

A: Required rate of return = risk free rate + beta * (market return - risk free rate)

Q: A stock has an expected return of 13.2 percent, the risk-free rate is 3.5 percent, and the market…

A: According to capital asset pricing model: rs=rf+beta×rm-rfwhere,rs=expected returnrm-rf=market risk…

Q: Assume that the risk-free rate is 5 percent and the market risk premium is 6 percent. What is the…

A: This question has two parts: First we need to compute the Expected return of overall stock market…

Q: What is the expected return for a stock that has a beta of 1.4, if the risk-free rate is 5%, and the…

A: Capital Asset pricing model: This model is used to determine the required rate of return on the…

Q: Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free…

A: The expected return of the portfolio can be calculated by computing the Portfolio Beta and applying…

Q: what is the expected return on this stock

A: Capital Asset Pricing Model(CAPM) is a method used for finding the relationship between the…

Q: Given the following information, use the CAPM to calculate the beta of the stock. The required rate…

A: Capital Asset Pricing Model CAPM model shows the relationship between the expected return and risk…

Q: Assume that the risk-free rate is 7.5% and the required return on the market is 10%. What is the…

A: The question is based on the concept of the capital asset pricing model (CAPM), the model explains…

Q: JaiLai Cos. stock has a beta of 0.7, the current risk-free rate is 6.1 percent, and the expected…

A: CAPM model provides formula that calculates the expected return on stock based on its level of risk.…

Q: If the expected return on a stock is 6 per cent. Risk free rate of return is 2 per cent and market…

A: Capital asset pricing model (CAPM) formula: Expected return = Risk free rate + (Beta *(Market rate -…

Q: A stock has a required return of 11%, the risk-free rate is 7%, and the market risk premium is 4%.…

A: Required return = risk free rate + beta*market risk premium 11 = 4 + beta*7

Q: Assume that the CAPM holds. Assume also that the expected return on the market portfolio is 10%. If…

A: Expected Return = Risk free rate + Beta ( Market Return - Risk Free Return)

Q: Assume that the risk-free rate is 5.5% and the required return on the market is 12%. What is the…

A: According to CAPM model: rstock=rf+βstock×rm-rf where, rf=risk free return rm = market return…

Q: What is the expected return for ABC Stock if the risk-free rate is 3.0%, the market risk premium is…

A: The mathematical representation of the formula is:

Q: A stock has a beta of 1.12, the expected return on the market is 10.6 percent, and the risk-free…

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

Q: Suppose Autodesk stock has a beta of 2.17​, whereas Costco stock has a beta of 0.71. If the​…

A: Autodesk beta = 2.17 Costco beta = 0.71 Risk free rate = 6% Market return = 11.5% Autodesk weight =…

Q: Assume that the risk-free rate is 2.5% and the required return on the market is 12%. What is the…

A: We need to use CAPM equation for calculation of required rate of return. The equation is…

Q: You have a portfolio that is invested 15 percent in Stock A, 48 percent in Stock B, and 37 percent…

A: Given, Weight of stock A = 15% or 0.15                 stock B  = 48% or 0.48                 stock…

Q: The expected return on the market is 15%, the risk-free rate is 8o/o, and the beta for Stock B is…

A: Given: The expected return = 15% = 0.15 Risk free rate = 8% = 0.08 Beta for stock = 0.8

Q: Stock R has a beta of 2.0, Stock S has a beta of 0.35, the required return on an average stock is…

A: Stock R beta (BR) = 2.0 Stock S beta (BS) = 0.35 Risk free rate (RF) = 3% Market rate of return (RM)…

Q: What is the expected return on a stock with a beta of .8, given a risk-free rate of 3.5% and an…

A: In this question we need to compute the expected return on stock. This question can be solved using…

Q: Consider the CAPM. The risk-free rate is 5%, and the expected return on the market is 15%. What is…

A: In the above question we need to calculate the value of beta. Looking at the information given in…

Q: You're analyzing a stock that has a beta of 1.65. If the risk free rate of return is .04 and market…

A: Beta =1.65 Risk free rate = 0.04 Market risk premium =0.15

Q: Stock R has a beta of 1.9, Stock S has a beta of 0.45, the required return on an average stock is…

A: The Required Rate of Return is computed by using CAPM as follows: Required Rate of return =…

Q: Using CAPM A stock has beta of 1.04, the expected return on the market is 10 percent, and the…

A: The expected return is the minimum required rate of return which an investor required from the…

Q: The risk-free rate of return is 4.8 percent and the market risk premium is 15 percent. What is the…

A: Risk free rate = 4.8% Market risk premium = 15% Beta = 1.80

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.