You have been looking for stocks that are "good values" and have calculated expected returns for five stocks. Assume the risk-free rate (kRF) is 7% and the market risk premium (kM - KRF) is 2%. Which security would be the best investment? (Assume you must choose just one.) Show your solutions and explain your answer. Stock Expected Return Beta A 9.01% 1.70 7.06% 0.00 C 5.04% 0.67 8.74% 0.87 11.50% 2.50

Q: beta of 1.40 and an expected return of 19%. Stock Z has a beta of 0.65 and an expected return of…

A: We need to compute expected return using CAPM (Capital asset pricing model) for each stock. CAPM…

Q: Stock R has a beta of 1.8, Stock S has a beta of 0.65, the expected rate of return on an average…

A: Required rate of return = risk free rate  +(beta * market risk premium)

Q: A stock has an expected return of 12.5 percent and a beta of 1.16, and the expected return on the…

A: Expected return of stock (Er) = 0.125 (12.5%) Beta (b) = 1.16 Expected return on the market (Rm) =…

Q: The current risk-free rate of return, rRF, is 4 percent and the market risk premium, RPM, is 8…

A: The formula to calculate the required rate of return using CAPM is as follows:Return = Riskfree rate…

Q: ou have been scouring PSE Edge looking for stocks that are “good values” and have calculated…

A: Risk Free Rate = 7% Market Return = 9%

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.95, the required return on an average stock is…

A: Required rate of return is defined as the minimum return regarding an investor, which is used to…

Q: Stock R has a beta of 2.0, Stock S has a beta of 0.45, the requiredreturn on an average stock is…

A: Calculation of difference between riskier stock and less risky stock: Answer: The difference between…

Q: You have been looking for stocks that are "good values" and have calculated expected returns for…

A: Risk free rate = 7% Market risk premium = 2%

Q: A stock has a beta of 1.22, the expected return on the market is 12 percent, and the risk- free rate…

A: given, beta = 1.22 expected market return ( rm) = 12% risk free rate ( rf) = 4%

Q: A stock has a beta of 1.12, the expected return on the market is 10 percent, and the free rate is 3…

A: In this we have to use capital assets pricing formula for calculation of expected return.

Q: A stock you are holding has a beta of 2.0 and the stock is currently in equilibrium. The required…

A: Given data; bets of stock = 2.0 Required rate of return on stock = 15% Required rate of return on…

Q: A stock has an expected return of 16 percent, its beta is 0.45, and the risk-free rate is 6.4…

A: CAPM is an investment theory that establishes the relationship between the expected return and the…

Q: A stock has a beta of 1.10, the expected return on the market is 12 percent, and the risk-free rate…

A: Given that the expected return on the market is 12%, risk free rate is 3.6% and the beta is 1.10, we…

Q: You have been looking for stocks that are "good values" and have calculated expected returns for…

A: KRf = 7% Market risk premium (Km - Krf) = 2%

Q: Stock A has a beta of 0.7, whereas Stock B has a beta of 1.3. Portfolio P has 50% invested in both A…

A: According to CAPM: required return = risk free rate+beta×market risk premium

Q: A stock has an expected return of 13.4 percent, its beta is 1.60, and the risk-free rate is 5.5…

A: We require to compute the expected market return (Rm) from following details : Expected return on…

Q: You are given information on two stocks. Stock AXE has a required return of 12.25% and analysts…

A: In this we have to calculate the expected return and required return and compare.

Q: Stock A has a beta of 0.2, and investors expect it to return 3%. Stock B has a beta of 1.8, and…

A: The market risk premium can be computed with the help of CAPM equation

Q: Assume that the risk-free rate is 6 percent and the expected return on the market is 13 percent.…

A: Given details are : Risk free rate (Rf) = 6% Expected return on market (Rm) = 13% Beta of stock =…

Q: A stock has an expected return of 12.4 percent, the risk-free rate is 6.5 percent, and the market…

A: According to CAPM : beta of stock = ( expected return - risk free rate)/market risk premium

Q: A stock has an expected return of 13.2 percent, the risk-free rate is 3.5 percent, and the market…

A: According to capital asset pricing model: rs=rf+beta×rm-rfwhere,rs=expected returnrm-rf=market risk…

Q: Stock R has a beta of 1.4, Stock S has a beta of 0.95, the expected rate of return on an average…

A: The required return of the stock is calculated using the Capital asset pricing model(CAPM ).    The…

Q: Calculate the expected (required) return for each of the following stocks when the risk-free rate is…

A: With the given information, we can determine the expected return as:

Q: Stock A has a beta of 1.5, the risk-free rate is 4% and the return on the market is 9%.  If…

A: Required rate of return is the minimum rate that an investor expects from their investment over the…

Q: The risk-free rate is 6 percent and the expected market risk premium is 8 percent. What is the…

A: Following details are given to us in the question : Risk free rate (Rf) = 6% Beta (B) = 0.7 Market…

Q: he risk-free rate is 4.2 percent and the expected return on the market is 12.3 percent. Stock A has…

A: If expected return is more than required return then security is undervalued. If required return is…

Q: A certain stock has a beta of 1.2. If the risk-free rate of return is 4.5 percent and the market…

A: Risk-free return = 4.5% Market risk premium = 8% a) Beta = 1.2 b) Beta = 1.08 CAPM formula: Expected…

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate ofreturn on an average…

A: The riskiness of security is measured by "Beta". Beta measures the volatility of the stock with…

Q: Stock A has a beta of 1.30, and its required return is 13.25%.  Stock B's beta is 0.90.  If the…

A: Given Beta of Stock A = 1.30 Risk free Rate = 4.75% Required return of stock A = 13.25%

Q: stock has a beta of 1.14, the expected return on the market is 10.8 percent, and the risk-free rate…

A: Beta=1.14 Return is market =10.8% Risk free rate =4.55%

Q: The risk-free rate of return is 4 percent and the market risk premium is 8 percent. What is the…

A: In given question we need to compute the expected rate of return for stock.

Q: A stock has an expected return of 11.25 percent, a beta of 0.82, and the expected return on the…

A: Capital asset pricing model is used to compute the expected return from a stock: Here, Expected…

Q: Stock R has a beta of 1.7, Stock S has a beta of 0.8, the required return on an average stock is…

A: The question is based on the concept of the capital asset pricing model (CAPM). CAPM explains the…

Q: You have been scouring PSE Edge looking for stocks that are “good values” and have calculated…

A: Risk free rate (Rf) = 7% Market return (Rm) = 9% Let's use CAPM to calculate the required return for…

Q: JaiLai Cos. stock has a beta of 0.6, the current risk-free rate is 6.0 percent, and the expected…

A: The following information has ben provided in the question: Beta =0.6 Risk free rate =6% Expected…

Q: Stock X has a beta of 0.6, while Stock Y has a beta of 1.4. Which of the following statements is…

A: Beta is a statistical measure which measures the risk involved in a particular stock.

Q: A stock has a beta of 1.2, the expected return on the market is 9 percent, and the risk-free rate is…

A: We need to use CAPM to calculate expected return Expected return =Risk free rate +Beta(Market return…

Q: Stock R has a beta of 1.9, Stock S has a beta of 0.45, the required return on an average stock is…

A: The Required Rate of Return is computed by using CAPM as follows: Required Rate of return =…

Q: A stock has a beta of 1.13, the expected return on the market is 10.7 percent, and the risk-free…

A: Beta (B) = 1.13 Market return (MR) = 10.7% Risk free rate (RF) = 4.6%

Q: A stock has a beta of 1.04, the expected return on the market is 11.75, and the risk-free rate is…

A: A stock is a financial security issued by companies to raise equity funds from the primary market.…

Q: Required Rate of Return Stock R has a beta of 1.4, Stock S has a beta of 0.45, the expected rate of…

A: Beta is one of the measure of volatility or risk of the stock. More beta means more risk and less…

Q: a. A stock has a beta of 1.2, the expected return on the market is 17 percent, and the risk-free…

A: Following details are given to us: Beta = 1.2 Expected return on Market = 17% Risk free rate= 8% We…