Pencil Corp. has an investment fund amounting to P3,000,000. The fun consist of three stocks as follows: |Investment Beta 50,000 500,000 1,000,000 1,000,000 Stock JFC 1.2 11 SCC NOW PAL 1 2.3 The market required rate of return is 10% while the risk-free rate is 3%

Pencil Corp. has an investment fund amounting to P3,000,000. The fun consist of three stocks as follows: |Investment Beta 50,000 500,000 1,000,000 1,000,000 Stock JFC 1.2 11 SCC NOW PAL 1 2.3 The market required rate of return is 10% while the risk-free rate is 3%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 10P

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Concept explainers

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.

Question

What is the market Risk Premium?

a. 3%

b. 7%

c. 10%

d. 13%

Option 2

Pencil Corp. has an investment fund amounting to P3,000,000. The fun consist of three stocks as follows:
|Investment Beta
50,000
500,000
1,000,000
1,000,000
Stock
JFC
1.2
11
SCC
NOW
PAL
1
2.3
The market required rate of return is 10% while the risk-free rate is 3%

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