Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.90

Fantastic news! We've Found the answer you've been seeking!

Question:

Suppose you observe the following situation:

Security	Beta		Expected Return
Pete Corp.		1.90		.200
Repete Co.		1.59		.173

What is the risk-free rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Risk-free rate

Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market?

Related Book For answer-question

Corporate Finance Core Principles and Applications

ISBN: 978-1259289903

5th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

See More Books

Posted Date: Jan 11, 2024 12:06 AM

See More Questions

1. In simple linear regression, the independent variable is the same as the explained variable. True / False 2. In time series analysis, an occurrence like flu that attacks the elderly in masses...
A $1,000 face value bond has a 5% coupon rate and matures after eight years. The bond is currently selling for $850. What is the yield to maturity on this bond? I
1). There are three securities in the market. The following chart shows their possible payoffs: State - Probability of Outcome -Return on Security 1 - Return on Security 2 - Return on Security 3 1...
Utilizing a change management framework implements a major organizational change or changes for a company with which you are familiar making them more competitive in the future. You are required to...
Who gained or lost when money losing catfish farmers left the industry (see the News Wire "Entry and Exit")?
In Problems 3344, find the one-sided limit. lim x-2+ x + x - 2 x + 2x
The eye bolt is used to support the load of 5 kip. Determine its diameter d to the nearest 1/8 in. and the required thickness h to the nearest 1/8 in. of the support so that the washer will not...
M. M. Sprout, a catalog mail order retailer, has one customer service representative (CSR) to take orders at an 800 telephone number. If the CSR is busy, the next caller is put on hold. For...
Find at least three potentially problematic data entries (cells) in this table, and decide how you would choose to address them. Would you remove the whole row? Somehow try to guess what the answer...
Prepare an estate tax return (Form 706) for Marcia Miller, who died July 23, 2019. Marcia (born April 2, 1930) resided at 117 Brandywine Way, Eastern City, PA 19000 and was a lifelong Pennsylvania...
In which of these instances does price function as a signal in the market? a) Suppliers invest more in exploration when the price of oil increases b) Consumers complain of pricing gouging as the...
According to chicks law the rate of kill of bacteria by chlorination follows first order reaction kinetics (radioactive decay is first order kinetics ). assuming this to be true, how much contact...
Compute the given substitutions. Just substitute the expression for the value; you don't need to simplify anything further. Recall that you may need to perform a-conversions to avoid variable...
(a) (b) (c) (d) (e) (f) Stars are painted on a coke cap with probability 0.05, independently from one cap to the next. A truck contains 10,200 cokes, organized into 1700 packs of 6. Find the...
references should be the NIRC as amended by TRAIN and CREATE Law, and pertinent Revenue Regulations Polka Cilla is a rank and file employee in an Advertising Firm in Makati. In the year 2019, he had...
A risky security has a SD of 20% and an expected return of 7%. A riskless security has a return of 3%. What is the return on a portfolio that has a risk of 10%? What is the risk (standard deviation)...
Select TWO companies listed in the construction sector of the Main Market of Bursa Malaysia Compute the relevant ratios for the analysis of the companies capital structure for the years 2015, 2016,...
Cable Corporation is 60% owned by Anna and 40% owned by Jim, who are unrelated. It has noncash assets, which it sells to an unrelated purchaser for $100,000 in cash and $900,000 in installment...
What are the direct and indirect costs of bankruptcy? Briefly explain each.
The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 40 percent chance of success. For $75,000, the manager can conduct a...
You own a portfolio that has $3,850 invested in Stock A and $6,100 invested in Stock B. If the expected returns on these stocks are 7.2 percent and 13.1 percent, respectively, what is the expected...
$X$ is the number of bits in error in the next four bits transmitted. What is the expected value of the square of the number of bits in error? Now, $h(X)=X^{2}$. Therefore, \[ \begin{aligned}...
Data 2.7 on page 95 introduces the dataset HollywoodMovies, which contains information on more than 900 movies that came out of Hollywood between 2007 and 2013. One of the variables is the budget (in...
Correlation between height and weight for players on the 2014 Brazil World Cup Team, using data from all 23 players on the roster. State whether the quantity described is a parameter or a statistic...

Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.90

Question:

Expert Answer:

To find the riskfree rate we can use the formula Riskfree rate Expected return Beta Market re... View the full answer

Corporate Finance Core Principles and Applications

Students also viewed these finance questions