The beta of a stock is 1.25. The expected return in the market is 14% and the risk-free rate is 5.2%. What should the expected return of this stock be?

The risk-free rate is 4% and the required return in the market is 12%.

What is the required return on an asset with a beta of 1.5?

A portfolio invests 40% of the asset in (a) and the remainder in a market portfolio. What is the required return on this portfolio?

You are analyzing a stock with a beta of 1.2. You estimate the risk-free rate to be 5% and the market risk premium to be 6%. If you expect the stock to return 11% next year, should you buy it? Why or why not?

Hint: First find the expected return for the stock using the CAPM.

Stock Y has a beta of 1.40 and an expected return of 19%. Share Z has a beta of 0.65 and an expected return of 10.5%. The market risk premium is 8.8%. The risk-free rate is 6%, are these stocks priced correctly? Show your argument for each stock.

Hint: First find the expected return for each stock using the CAPM.

cost of capital

Use the following information to determine a company's WACC (assuming a 40% tax rate):

-- A company has 10,000 bonds with an annual coupon rate of 6%, a maturity of 8 years, a face value of $1,000 and a market price of $1,100.

-- The company's 100,000 preferred shares pay a $3 annual dividend and sell at $30 per share.

-- The company's 500,000 common shares are selling at $25 per share, with a beta of 1.5, a risk-free rate of 4% and a market return of 12%.

Answer rating: 100% (QA)

lTo calculate the expected return of the stock using CAPM Expected return Riskfree rate Beta x Expected market return Riskfree rate Expected return 52 ... View the full answer