Treasury bill yield is 10%, ABC company’s expected return for the next year is 18%, beta of ABC company is 2. If everything is in equilibrium as required by CAPM, what is the market’s expected return for the next year? a. 14% b. 8.5% c. 11% d. 21%

Q: Booher Book Stores has a beta of 0.8. The yield on a 3-month T-bill is 4%,and the yield on a 10-year…

A: Beta = 0.80 Risk free rate = 6% Market risk premium = 5.50%

Q: Welltodo Ltd has the following capital structure, which it considers to be optimal: debt = 15%,…

A: Note : Dividend Discount Model applies to those companies who use to pay dividends and Capital Asset…

Q: valuation of QuickChange

A: as per the calulation value if shares of quick change is $15.32 Free income to Equity (FCFE) =…

Q: Assume the ASX 200 forward earnings yield is 6 percent and the 10-year T-note yield is 5.6 percent.…

A: Forward earnings yield = 6% 10 year Treasury note yield = 5.6%

Q: Teh stocks is currently selling for $15.25 par share and its noncallable $1000 par value, 20 year,…

A: The question is based on the calculation of cost of equity by using the principle of capital asset…

Q: Metro company has a beta of 1.20, the risk free rate of return is currently ---- (consider the…

A: Formula for calculating required rate using CAPM is:

Q: Assume that you are on the financial staff of Kumpulan Bossque, and you have collected the following…

A: Weighted average cost of capital(WACC) is the average cost of capital which can be calculated by…

Q: What is after tax cost of debt?

A: Information Provided: Tax rate = 27% Yield on Bond = 7.62%   Cost of debt: It is the effective rate…

Q: beta of 0.9. The yield on a 3-month T-bill is 4% and the yield on a 10-year T-bond is 8%. The market…

A: As per capital asset pricing model :- Cost of equity= risk free rate + beta * market risk premium…

Q: Market analysts expect the earnings per share of JJC Ltd to be 3.00 dollars next year. The company…

A: In the given question we require to calculate the current share price from the following details for…

Q: A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s…

A: Computation:

Q: A Company is expected to pay a dividend of sh2 in the upcoming year. The risk-free rate of return is…

A: Expected dividend = $2 Risk-free rate of return = 4% Expected return on the market portfolio = 14%…

Q: Assume that the dividend payout ratio will be 75 percent when the rate on long-term government bonds…

A: Given, Payout ratio = 75% or 0.75 Return on equity = 12% Required rate of return = 15%

Q: Castle-in-Sand generates a rate of return of 20% on its investments and maintains a plowback ratio…

A: It is given that the rate of return on investment is 20% and plowback or retention ratio is 0.30…

Q: Assume the real return in the economy is 4 percent. It is anticipated that the consumer price index…

A: Real Return = 4% Consumer Price Index Start = 200 Consumer Price Index End = 210 Expected Inflation…

Q: The market value of Fords' equity, preferred stock, and debt are $6 billion, $2 billion, and $11…

A: Weighted Average Cost of Capital (WACC) is the rate at which the company is willing to pay to its…

Q: Booher Book Stores has a beta of 0.5. The yield on a 3-month T-bill is 3%, and the yield on a…

A: Given Information  Beta of stock = 0.5 Yield on 3 month T bill = 3% Yield on 10 year bond = 8%…

Q: The risk-free rate of return is 6.5%, the expected rate of return on the market portfolio is 17%,…

A: Required Rate of Return = Risk-free Rate of Return + Beta *(Rate of Return on Market - Risk-free…

Q: 1. The fim is expected to pay a dividend of D, = P1.25 per share at the end of the year, and that…

A: Risk free rate = 4% Market risk premium = 6.50% Beta = 1.25 Expected return (R) = Risk free…

Q: Assume you expect a company’s net income to remain stable at $3500 for all future years, and you…

A: CAPM refers to the Capital Asset pricing model, under this model cost of equity can be calculated…

Q: The current market price of Venus Filters Ltd is Rs.67. The expected dividend after a year is…

A: Market price = Dividend next year / (Required return - growth rate)   Required return = Dividend…

Q: oher Book Stores has a beta of 1.2. The yield on a 3-month T-bill is 5% and the yield on a 10-year…

A: The capital assets pricing model is a technique that helps to compute the required rate of return…

Q: 1) Universal Auto Limited has a zero coupon bond outstanding with a $50,000 face value that matures…

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: The required rate of return for Ola Industries is 15.75 percent. The stock pays a current dividend…

A: This question require us to calculate the estimated price of the stock of Ola industries. We can…

Q: The market premium, E(RM)−rfis estimated to be 8% per annum, while the risk-free return (rf) is…

A: This question can be solved with the help of CAPM model Ke=Rf+β(Km-Rf) Ke=Expected return Rf=Risk…

Q: Booher Book Stores has a beta of 1.3. The yield on a 3-month T-bill is 5% and the yield on a 10-year…

A: CAPM is the method of calculating the expected return on investment. The formula to calculate the…

Q: The level of the Syldavian market index is 21,300 at the start of the year and 25,800 at the end.…

A: Part (a)As a first step let's assign a symbol to all the information we have in the question.I0 =…

Q: 19 Jeanette's Medical Supply has a beta of 1.47 and its RWACC is 11.8 percent. The market risk…

A: Given: Particulars   Beta 1.47 Market risk premium 7.40% Risk free rate 3.60% Cash flow…

Q: dust Telecommunications, Inc has the following target capital structure, which it considers to be…

A: Weighted average cost of capital is the weighted cost of equity, preferred stock and debt to be used…

Q: Kokomo Inc. stock is currently selling at $33.1 per share (its equilibrium price). The firm’s…

A: First we need to use constant growth model to calculate stock price. The equation is  Stock…

Q: Metro company has a beta of 1.20, the risk free rate of return is currently ----- (consider the…

A: Constant Growth Model is a type of method used for measuring the value of the stock price of the…

Q: The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to…

A: Part (1): Calculation of cost of common equity: Answer: The cost of common equity under DCF approach…

Q: A financial analyst estimates that the current risk-free rate for NN company is 6.25 percent, the…

A: Gordon growth model provides the current price of a share if it has a constant growth till infinity

Q: Oakdale Furniture Inc. has a beta coefficient of 0.7 and a required rate of return of 15 percent.…

A: Required return= Risk Free Rate + Beta x (Risk Premium)       15% = Risk free rate + 5% x 0.7 Risk…

Q: The level of the Syldavian market index is 21,600 at the start of the year and 26,100 at the end.…

A: Risk premium Investors expect higher returns on their investments to make up for the higher risks…

Q: Assume the return on large-company stocks is currently 11.5 percent. The risk premium on…

A: Return means get something form the investment. Return is directly (positively) relates with the…

Q: Booher Book Stores has a beta of 0.4. The yield on a 3-month T-bill is 5% and the yield on a 10-year…

A: Equity represents the  capital for the company that has provided to the shareholders of the company.…

Q: Metro company has a beta of 1.20, the risk free rate of return is currently ----- (consider the…

A: CAPM stands for Capital Asset Pricing Model. This model considers the risk premium which is derived…

Q: Assume the S&P 500 has a dividend yield of 2.8 percent. Analysts expect overall dividends to grow at…

A: Expected market rate of return = dividend yield + growth rate   Market risk premium = Expected…

Q: Data for KeyKay Industries is shown below. Now KeyKay acquires some risky assets that cause its beta…

A: As per the capital asset pricing model (CAPM) method,  Re = Rf + β(Rm - Rf) Where, Re = Expected…

Q: Draw the cash flow diagram. b)If the expected market return is 12%, the risk-free rate is 5%, and…

A: Part a: Dividend = Rs.12 per share  Growth rate = 5%  The cash flow diagram represents the cash…

Q: Treasury bill yield is 10%, ABC company’s expected return for the next year is 18%, beta of ABC…

A: Thee market return can be calculated with the help of CAPM equation

Q: Pixieedust Telecommunications, Inc has the following target capital structure, which it considers to…

A: Preferred Stock is that type of stock that possesses both equities and debt features. It is also…

Q: TTY currently pays a dividend of Ghc1.60 per year. A current price is Ghc118.36. An analyst makes…

A: Dividend Now=D0=1.6 Dividend next =D1=1.6(1.14)=1.824 D2=1.824(1.14)=2.079 D3=2.079(1.12)=2.32…

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.