The required return on ABC stock is 14%. The risk-free rate of return is 4% and the real rate of return is 2%. How much are investors requiring as compensation for risk?
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CAN I GET HELP as soon as possible please
Explain your answer for each of them. Show all your work.
- The required return on ABC stock is 14%. The risk-free
rate of return is 4% and the real rate of return is 2%. How much are investors requiring as compensation for risk?
- A) 8%
- B) 10%
- C) 12%
- D) 14%
- The
efficient market hypothesis suggests that
A) investors should not try to outguess the market by constantly buying and selling securities. - B) investors do better on average if they adopt a "buy and hold" strategy.
C) buying into a mutual fund is a sensible strategy for a small investor.
D) all of the above are sensible strategies.
E) only A and B of the above are sensible strategies.
Step by step
Solved in 3 steps
- Every morning, Bob Smith puts his stock pick of the week up on Yahoo! Finance for the world to see. Every week, Ben Graham seets it, waits a few hours and then buys the stock and it always goes up! This would appear to violate the: a) Weighted Average Cost of Capital b) Volitality Principal c) Capital Asset Pricing Model d) Efficient Market HypothesisPorter Plumbing's stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.) Select the correct answer. a. 14.38% b. 12.78% c. 13.18% d. 13.58% e. 13.98%Monkey corporation want to buy stocks in the Goose company, Monkey financial manager says that the stock fair price is 50 dollars if the treasury bill rate is 0.1 and the covariance between the stock and the market is 0.0033 and the standard deviation of the market is 0.06 ,the market return is 0.15what is the what is the required rate of return ? Answer
- Porter Plumbing's stock had a required return of 10.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.) Select the correct answer. a. 12.96% b. 13.06% c. 13.16% d. 13.26% e. 13.36% Zacher Co.'s stock has a beta of 1.28, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is the firm's required rate of return? Select the correct answer. a. 10.09% b. 10.49% c. 11.29% d. 10.89% e. 11.69%Explain how a financial market operates? Which of the investment constraints is expected to have the most impact on your decision process? You plan to buy common stock and hold it for one year. You expect to receive both ₱150 and ₱260 from the sale of the stock at the end of the year. How much will you pay for the stock, if you want to a. Have a return of 8% b. A return of 20% c. A return of 15%Jerry Allen graduated from the University of Arizona with a degree in Finance in 2011 and took a job with an investment banking firm as a financial analyst. One of his first assignment is to investigate the investor-expected rate of return for technology firms: Apple (APPL), Dell (DELL) and Hewlett Packard (HPQ). Jerry’s supervisor suggested that he make his estimates using CAPM where the risk-free rate is 4.5%. the expected return on the market is 10.5% 1. Calculate the risk premium of the market show all the working formula where applicable
- Jerry Allen graduated from the University of Arizona with a degree in Finance in 2011 and took a job with an investment banking firm as a financial analyst. One of his first assignment is to investigate the investor-expected rate of return for technology firms: Apple (APPL), Dell (DELL) and Hewlett Packard (HPQ). Jerry’s supervisor suggested that he make his estimates using CAPM where the risk-free rate is 4.5%. the expected return on the market is 10.5% 1. Calculate the risk premium of the market show all the working formula where applicable/ 2. Calculate the expected return using CAPM equation using a beta coefficient of 2.00 3. Solve the expected return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6% yield 4. Calculate the expected return with the CAPM equation using each of the following beta estimates for the three technology firms. Present the information in a tabulated formatYou have been provided the following information as part of a consultation query:The risk free rate is 3.2%The market risk premium (rM - rRF) is 5.3%Stock A - has a beta of 1.2 betaStock B - has a beta of 0.85 beta (a). What is the required rate of return on each stock? (b). Assume that investors become less willing to take on risk (ie., they become more riskaverse), so the market risk premium rises 6%. Assume that the risk-free rate remains constant. What effect will this have on the required rates of return on the two stocks?An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm’s prospects look neutral and you estimate the following probability distribution of possible returns: Conditions P Returns on DBB Returns on DVI Recession 0.10 -30% -15% Below Average 0.20 -15% 4% Average 0.40 15% 8% Above Average 0.20 28% 20% Boom 0.10 40% 22% a) How much is the expected return for DBB? b) How much is the coefficient of variation for DBB? c) Now let’s say you want to add another asset, DVI, to your portfolio. You sell 20% of DBB to purchase DVI. How much is your expected return for this portfolio? d) How much is the coefficient of variation for the new portfolio? Please show the Excel formulas.
- this is the first part of my question which I managed to solve but you are gonna need it to solve the second part which I NEED HELP in. Model the following investment decision as an Influence Diagram: a high-risk stock - $200 brokerage fee Payoff- $1700 if the market goes up $300 if market stays neutral -$800 if the market goes down a low-risk stock - $200 brokerage fee Payoff- $1200 if the market goes up $400 if market stays neutral $100 if the market goes down Student 1 hour ago a savings account that pays a sure $500 P(Market Up)=0.480, P(Market Flat) = 0.297, and P(Market Down) = 1-P(Market Up)-P(Market Flat). Student 1 hour agoJerry Allen graduated from the University of Arizona with a degree in Finance in 2011 and took a job with an investment banking firm as a financial analyst. One of his first assignment is to investigate the investor-expected rate of return for technology firms: Apple (APPL), Dell (DELL) and Hewlett Packard (HPQ). Jerry’s supervisor suggested that he make his estimates using CAPM where the risk-free rate is 4.5%. the expected return on the market is 10.5% 2. Calculate the expected return using CAPM equation using a beta coefficient of 2.00 3. Solve the expected return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6% yield 4. Calculate the expected return with the CAPM equation using each of the following beta estimates for the three technology firms. Present the information in a tabulated format Answer text Question 8 Rich text editorA financial manager believes that her firm will earn a 15% return next year. This firm has a beta of 1.8, and the expected return on the market is 8% while the risk-free rate is 2%. First, compute the return this firm should earn given its level of risk. Second, determine whether this firm’s stock is overvalued or undervalued given what the manager thinks this company will earn next year.