Stock A has an expected return of 15%, and a standard deviation of 1%. Stock B has an expected return of 20% and a standard deviation of 2%. The correlation coefficient between these two stocks is 1. What shoul be the risk free interest rate in this market to prevent arbitrage opportunity? O 10% O 1% O 5% 8.5% 7.5% Question 8 Oakdale Furniture Inc. has a beta coefficient of 0.7 and a required rate of return of 15 percent. The market risk premium is currently 5 percent. If the inflation premium increases by 2 percentage points, and Oakdale acquires new assets that increase its beta by 50 percent, what will be Oakdale's new required rate of return (assume that the inflation premium affects both the market return and the risk free rate the same way)? 22.80%

Stock A has an expected return of 15%, and a standard deviation of 1%. Stock B has an expected return of 20% and a standard deviation of 2%. The correlation coefficient between these two stocks is 1. What shoul be the risk free interest rate in this market to prevent arbitrage opportunity? O 10% O 1% O 5% 8.5% 7.5% Question 8 Oakdale Furniture Inc. has a beta coefficient of 0.7 and a required rate of return of 15 percent. The market risk premium is currently 5 percent. If the inflation premium increases by 2 percentage points, and Oakdale acquires new assets that increase its beta by 50 percent, what will be Oakdale's new required rate of return (assume that the inflation premium affects both the market return and the risk free rate the same way)? 22.80%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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