Capital Asset Pricing Model - Securities Market Line (20 points -30 minutes) a. You expect an...

 

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Capital Asset Pricing Model - Securities Market Line (20 points -30 minutes) a. You expect an RFR(risk-free rate) of 8 percent and the market return of 16 percent. Compute the required returns for the following stocks, and plot them on and SML graph. (10 Points) Stock U N D Beta 0.75 1.4 -0.30 b. You ask a stockbroker what the firm's research department expects for these three stocks. The broker responds with the following information: Stock Current Price ($) Expected Price ($) Expected Dividend ($) U N D 20 45 30 24 47 33 1,00 1,50 0,75 Plot your estimated returns on the graph from Part a and indicate what actions you would take with regard to these stocks. Explain your decisions. (10 Points) Capital Asset Pricing Model - Securities Market Line (20 points -30 minutes) a. You expect an RFR(risk-free rate) of 8 percent and the market return of 16 percent. Compute the required returns for the following stocks, and plot them on and SML graph. (10 Points) Stock U N D Beta 0.75 1.4 -0.30 b. You ask a stockbroker what the firm's research department expects for these three stocks. The broker responds with the following information: Stock Current Price ($) Expected Price ($) Expected Dividend ($) U N D 20 45 30 24 47 33 1,00 1,50 0,75 Plot your estimated returns on the graph from Part a and indicate what actions you would take with regard to these stocks. Explain your decisions. (10 Points)

Answer rating: 100% (QA)

solution a Risk free Rate of Return 81 R Market ... View the full answer