Refer to Exhibit 7.2. What are the expected (required) rates of return for the three stocks (in the order X, Y, Z)?   a. 21.25 percent, 8.33 percent, 11.43 percent   b. 16.50 percent, 5.50 percent, 22.00 percent   c. 15.00 percent, 3.50 percent, 7.30 percent   d. 6.20 percent, 2.20 percent, 8.20 percent   e. 9.25 percent, 10.5 percent, 7.5 percent

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 26P
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QUESTION 8

  1. Exhibit 7.2

    USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

     

    You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.

     

    Current

    Expected

    Expected

    Stock

    Beta

    Price

    Price

    Dividend

    X

    1.25

    $20

    $23

    $1.25

    Y

    1.50

    $27

    $29

    $0.25

    Z

    0.90

    $35

    $38

    $1.00

     

     


    Refer to Exhibit 7.2. What are the expected (required) rates of return for the three stocks (in the order X, Y, Z)?
      a.
    21.25 percent, 8.33 percent, 11.43 percent
      b.
    16.50 percent, 5.50 percent, 22.00 percent
      c.
    15.00 percent, 3.50 percent, 7.30 percent
      d.
    6.20 percent, 2.20 percent, 8.20 percent
      e.
    9.25 percent, 10.5 percent, 7.5 percent
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