e Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.6 offers an expected return of 8.4%, does it have a positive or negative NPV? d. If the market expects a return of 11.6% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
e Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.6 offers an expected return of 8.4%, does it have a positive or negative NPV? d. If the market expects a return of 11.6% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13P
Related questions
Question
100%
The Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to the
a. What is the risk premium on the market?
b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
c. If an investment with a beta of 0.6 offers an expected return of 8.4%, does it have a positive or negative
d. If the market expects a return of 11.6% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Step 1 Analysis
VIEWStep 2 (a) the risk premium on the market
VIEWStep 3(b.) the required return on an investment with a beta of 1.4
VIEWStep 4 (c) NPV If an investment with a beta of 0.6 offers an expected return of 8.4%
VIEWStep 5 d. If the market expects a return of 11.6% from stock X, what is its beta
VIEWTrending now
This is a popular solution!
Step by step
Solved in 5 steps
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning