Notes & perfect market equations: In equilibrium, required returns (based on risk) = expected returns CAPM...

  

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Notes & perfect market equations: In equilibrium, required returns (based on risk) = expected returns CAPM equation: E(TA) =rf BA (E(TM) - rf) WACC D/V E(rD) + E/V E(TE) E(re) = E(TA)+(E(TA) - E(rD)) D/E (MM Proposition 2 equation) BA DIV BD +E/V BE BE BA (BA-BD) D/E TE = E(re) = Using the following values and the CAPM equation, what is E(A), i.e., the expected return for the following firm's assets? BE = 1.5 rf = 4% TD = E(rd) = 7% D= = = TM E(TM) 11% TA E(TA) Solve for this BA= D/V = 0.5 Enter your answer as a percent to two decimal places (e.g., 0.1250 = 12.50%). If the answer is negative, enter with the minus sign (e.g., enter as -12.50%). Full credit: within 0.02% of the correct answer (e.g., 12.48% -12.52%). Partial credit: within 0.10% of the correct answer (e.g., 12.40% - 12.60%). Note - there are two versions of this question. This question asks for the expected return of the assets, E(TA). The other version asks for the beta of the assets, BA. Repeat the quiz until you get to see both versions. Activate Windows Notes & perfect market equations: In equilibrium, required returns (based on risk) = expected returns CAPM equation: E(TA) =rf BA (E(TM) - rf) WACC D/V E(rD) + E/V E(TE) E(re) = E(TA)+(E(TA) - E(rD)) D/E (MM Proposition 2 equation) BA DIV BD +E/V BE BE BA (BA-BD) D/E TE = E(re) = Using the following values and the CAPM equation, what is E(A), i.e., the expected return for the following firm's assets? BE = 1.5 rf = 4% TD = E(rd) = 7% D= = = TM E(TM) 11% TA E(TA) Solve for this BA= D/V = 0.5 Enter your answer as a percent to two decimal places (e.g., 0.1250 = 12.50%). If the answer is negative, enter with the minus sign (e.g., enter as -12.50%). Full credit: within 0.02% of the correct answer (e.g., 12.48% -12.52%). Partial credit: within 0.10% of the correct answer (e.g., 12.40% - 12.60%). Note - there are two versions of this question. This question asks for the expected return of the assets, E(TA). The other version asks for the beta of the assets, BA. Repeat the quiz until you get to see both versions. Activate Windows