Problem 11 Intro Assume that the CAPM holds. One stock has an expected return of 9% and beta of 0.5. Another stock has an expected return of 13% and a beta of 1.5. Part 1 What is the expected return on the market?
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- Ch. 11. Using CAPM, A stock has an expected return on 10.7 percent, the risk-free rate is 4.1 percent, and the market risk premium is 6 percent. What must the beta of this stock be? Round to two places past the decimal point as "X.XX"8.9 Stock R has a beta of 2.3, Stock S has a beta of 0.9, the required return on an average stock is 8%, and the risk-free rate of return is 6%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places.Problem 8-09 Stock A has a risk premium of 6.2 percent. If Treasury bills yield 2.2 percent and the expected return on the market is 9.2 percent, what is the stock’s beta coefficient? Round your answer to two decimal places.
- 11.12 Using CAPM A stock has a beta of 1.15, the expected return on the market is 11.1 percent, and the risk-free rate is 3.8 percent. What must the expected return on this stock be?12.1 Factor Models A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 3.5 percent and the interest rate is expected to be 2.9 percent. A stock has a beta of 1.3 on the percentage change in GNP and a beta of −.47 on the interest rate. If the expected rate of return on the stock is 10.2 percent, what is the revised expected return on the stock if GNP actually grows by 3.2 percent and the interest rate is 2.7 percent?