INVESTEMENTS (LL) W/CONNECT <CUSTOM>
11th Edition
ISBN: 9781264263554
Author: Bodie
Publisher: MCG
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Question
Chapter 9, Problem 4PS
Summary Introduction
Adequate information:
T bill rate = 4%
Market risk premium = 6%
Beta of $1 Discount store = 1.5
Beta of Everything $5 = 1.0
To compute:
Expected return of $1 Discount store and everything $5 as per
Introduction:
Expected return of the security as per CAPM is given by:
Expected return = Risk free rate + Beta of the security X Market risk premium
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Students have asked these similar questions
a. Given the following information, calculate the expected value for Firm C’s EPS. Datafor Firms A and B are as follows: E(EPSA) =$5.10, σA =$3.61, E(EPSB) =$4.20, and σB = $2.96.
b. You are given that σC = $4.11. Discuss the relative riskiness of the three firms’ earnings.
Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 1.65 when the risk-free rate and market return are 8% and 14%, respectively.
b. Find the risk-free rate for a firm with a required return of 11.366% and a beta of 1.29 when the market return is 10%.
c. Find the market return for an asset with a required return of 7.711% and a beta of 0.89 when the risk-free rate is 4%.
d. Find the beta for an asset with a required return of 6.552% when the risk-free rate and market return are 6% and 8.4%, respectively.
Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 1.63 when the risk-free rate and market return are 5% and 13%, respectively.
b. Find the risk-free rate for a firm witha required return of 14.363% and a beta of 1.07 when the market return is 14%.
C. Find the market return for an asset with a required return of 9.045% and a beta of 1.57 when the risk-free rate is 3%.
d. Find the beta for an asset with a required return of 10.255% when the risk-free rate and market return are 6% and 9.7%, respectively.
a. The required return for an asset with a beta of 1.63 when the risk-free rate and market return are 5% and 13%, respectively, is %.
Chapter 9 Solutions
INVESTEMENTS (LL) W/CONNECT <CUSTOM>
Ch. 9 - Prob. 1PSCh. 9 - Prob. 2PSCh. 9 - Prob. 3PSCh. 9 - Prob. 4PSCh. 9 - Prob. 5PSCh. 9 - Prob. 6PSCh. 9 - Prob. 7PSCh. 9 - Prob. 8PSCh. 9 - Prob. 9PSCh. 9 - Prob. 10PS
Ch. 9 - Prob. 11PSCh. 9 - Prob. 12PSCh. 9 - Prob. 13PSCh. 9 - Prob. 14PSCh. 9 - Prob. 15PSCh. 9 - Prob. 16PSCh. 9 - Prob. 17PSCh. 9 - Prob. 18PSCh. 9 - Prob. 19PSCh. 9 - Prob. 20PSCh. 9 - Prob. 21PSCh. 9 - Prob. 22PSCh. 9 - Prob. 23PSCh. 9 - Prob. 24PSCh. 9 - Prob. 1CPCh. 9 - Prob. 2CPCh. 9 - Prob. 3CPCh. 9 - Prob. 4CPCh. 9 - Prob. 5CPCh. 9 - Prob. 6CPCh. 9 - Prob. 7CPCh. 9 - Prob. 8CPCh. 9 - Prob. 9CPCh. 9 - Prob. 10CPCh. 9 - Prob. 11CPCh. 9 - Prob. 12CP
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