The estimated rate of return of the investment. Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 10, Problem 1PS

Summary Introduction

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Expert Solution & Answer

Answer to Problem 1PS

The expected rate of return is 15.5% of the stock.

Explanation of Solution

Here, the expected rate of return is calculated as given below,

Return rate = [E(R)+β1F1+β2F2] , here first we calculated F1 and F2 .

Now calculate F1 , A the value of actual (IP) is 5% and E (IP) is 3%

F1 = 5% − 3% = 2%

Now calculate factor F2 , F2= [Actual (IR) – E (IR)],

F2= 8% − 5% = 3%,

Now substitute the values of factor in equation, we get,

Return rate(R)=[E(R)+β1F1+β2F2]=12%+1×2%+0.5×3%=15.5%

Hence the expected rate of return is 15.5 % for the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 3%, and IR 5%. A stock with a beta of 1 on IP and .5 on IR currently is expected to provide a rate of return of 12%. If industrial production actually grows by 5%, while the inflation rate turns out to be 8%, what is your revised estimate of the expected rate of return on the stock?

Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 5%, and IR 4.0%. A stock with a beta of 1.2 on IP and 0.6 on IR currently is expected to provide a rate of return of 8%. If industrial production actually grows by 6%, while the inflation rate turns out to be 6.0%, what is your revised estimate of the expected rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 3%, and IR 3.4%. A stock with a beta of 2.8 on IP and 2.2 on IR currently is expected to provide a rate of return of 15%. If industrial production actually grows by 7%, while the inflation rate turns out to be 5.0%, what is your revised estimate of the expected return on the stock (write as percentage, rounded to one decimal place)?

Answer 2

Question

Chapter 10, Problem 1PS

Summary Introduction

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Expert Solution & Answer

Answer to Problem 1PS

The expected rate of return is 15.5% of the stock.

Explanation of Solution

Here, the expected rate of return is calculated as given below,

Return rate = [E(R)+β1F1+β2F2] , here first we calculated F1 and F2 .

Now calculate F1 , A the value of actual (IP) is 5% and E (IP) is 3%

F1 = 5% − 3% = 2%

Now calculate factor F2 , F2= [Actual (IR) – E (IR)],

F2= 8% − 5% = 3%,

Now substitute the values of factor in equation, we get,

Return rate(R)=[E(R)+β1F1+β2F2]=12%+1×2%+0.5×3%=15.5%

Hence the expected rate of return is 15.5 % for the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 10, Problem 1PS

Summary Introduction

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Expert Solution & Answer

Answer to Problem 1PS

The expected rate of return is 15.5% of the stock.

Explanation of Solution

Here, the expected rate of return is calculated as given below,

Return rate = [E(R)+β1F1+β2F2] , here first we calculated F1 and F2 .

Now calculate F1 , A the value of actual (IP) is 5% and E (IP) is 3%

F1 = 5% − 3% = 2%

Now calculate factor F2 , F2= [Actual (IR) – E (IR)],

F2= 8% − 5% = 3%,

Now substitute the values of factor in equation, we get,

Return rate(R)=[E(R)+β1F1+β2F2]=12%+1×2%+0.5×3%=15.5%

Hence the expected rate of return is 15.5 % for the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 10, Problem 1PS

Summary Introduction

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Expert Solution & Answer

Answer to Problem 1PS

The expected rate of return is 15.5% of the stock.

Explanation of Solution

Here, the expected rate of return is calculated as given below,

Return rate = [E(R)+β1F1+β2F2] , here first we calculated F1 and F2 .

Now calculate F1 , A the value of actual (IP) is 5% and E (IP) is 3%

F1 = 5% − 3% = 2%

Now calculate factor F2 , F2= [Actual (IR) – E (IR)],

F2= 8% − 5% = 3%,

Now substitute the values of factor in equation, we get,

Return rate(R)=[E(R)+β1F1+β2F2]=12%+1×2%+0.5×3%=15.5%

Hence the expected rate of return is 15.5 % for the firm.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 1PS

Summary Introduction

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Expert Solution & Answer

Answer to Problem 1PS

The expected rate of return is 15.5% of the stock.

Explanation of Solution

Here, the expected rate of return is calculated as given below,

Return rate = [E(R)+β1F1+β2F2] , here first we calculated F1 and F2 .

Now calculate F1 , A the value of actual (IP) is 5% and E (IP) is 3%

F1 = 5% − 3% = 2%

Now calculate factor F2 , F2= [Actual (IR) – E (IR)],

F2= 8% − 5% = 3%,

Now substitute the values of factor in equation, we get,

Return rate(R)=[E(R)+β1F1+β2F2]=12%+1×2%+0.5×3%=15.5%

Hence the expected rate of return is 15.5 % for the firm.

Answer 6

Chapter 10, Problem 1PS

Summary Introduction

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Expert Solution & Answer

Answer to Problem 1PS

The expected rate of return is 15.5% of the stock.

Explanation of Solution

Here, the expected rate of return is calculated as given below,

Return rate = [E(R)+β1F1+β2F2] , here first we calculated F1 and F2 .

Now calculate F1 , A the value of actual (IP) is 5% and E (IP) is 3%

F1 = 5% − 3% = 2%

Now calculate factor F2 , F2= [Actual (IR) – E (IR)],

F2= 8% − 5% = 3%,

Now substitute the values of factor in equation, we get,

Return rate(R)=[E(R)+β1F1+β2F2]=12%+1×2%+0.5×3%=15.5%

Hence the expected rate of return is 15.5 % for the firm.

Answer 7

Chapter 10, Problem 1PS

Summary Introduction

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Answer 8

Expert Solution & Answer

Answer to Problem 1PS

The expected rate of return is 15.5% of the stock.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Here, the expected rate of return is calculated as given below,

Return rate = [E(R)+β1F1+β2F2] , here first we calculated F1 and F2 .

Now calculate F1 , A the value of actual (IP) is 5% and E (IP) is 3%

F1 = 5% − 3% = 2%

Now calculate factor F2 , F2= [Actual (IR) – E (IR)],

F2= 8% − 5% = 3%,

Now substitute the values of factor in equation, we get,

Return rate(R)=[E(R)+β1F1+β2F2]=12%+1×2%+0.5×3%=15.5%

Hence the expected rate of return is 15.5 % for the firm.

Answer 12

Ch. 10 - Prob. 1PS Ch. 10 - Prob. 2PS Ch. 10 - Prob. 3PS Ch. 10 - Prob. 4PS Ch. 10 - Prob. 5PS Ch. 10 - Prob. 6PS Ch. 10 - Prob. 7PS Ch. 10 - Prob. 8PS Ch. 10 - Prob. 9PS Ch. 10 - Prob. 10PS

The estimated rate of return of the investment. Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Videos

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Answer to Problem 1PS

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

The estimated rate of return of the investment. Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Videos

To calculate: The estimated rate of return of the investment. Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.

Answer to Problem 1PS

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

To calculate: The estimated rate of return of the investment.

Introduction: The expected rate of return is the value which is expected by the investor after the completion of the maturity period of the investment. This gives the security to the investor for his assumptions.