Question: If the risk free rate of return rRF is 4 percent
If the risk-free rate of return, rRF, is 4 percent and the market return, rM, is expected to be 12 percent, what is the required rate of return for a stock with a beta, 13, equal to 2.5?
Answer to relevant QuestionsHow can knowledge of financial decision making by corporate financial managers help you make personal financial decisions?Following is information for two stocks:Which investment has the greater relative risk?Explain the following statement: “a stock held as a part of portfolio is generally less risky than the same stock held in isolation.Suppose that if rRF = 5% and rM = 12%. What is the appropriate required rate of return for a stock that has a beta coefficient equal to 1.5? Suppose a firm invest in projects that are much riskier than its average investments. Do you think the firm’s weighted average cost of capital will be affected? Explain
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