Question: Beta and required rate of return A stock has a required return of 11 percent; the risk-free rate is 7 percent; and the market risk

Beta and required rate of return A stock has a required return of 11 percent; the risk-free rate is 7 percent; and the market risk premium is 4 percent.

a. What is the stock’s beta?

b. If the market risk premium increased to 6 percent, what would happen to the stock’s required rate of return? Assume the risk-free rate and the beta remains unchanged.

Step by Step Solution

★★★★★

3.32 Rating (158 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

E r pbeta Where E expected return r risk free rate p ri... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

68-B-F-F-M (2183).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

You have resources deployed to multiple Azure regions. You plan to deploy Microsoft Sentinel. You need to estimate the costs associated with using Microsoft Sentinel to monitor the Azure resources....

A stock has an annual return of 11 percent and a standard deviation of 54 percent. What is the smallest expected loss over the next year with a probability of 1 percent? Does this number make sense?

Judy Johnson is choosing between investing in two Treasury securities that mature in five years and have par values of $1,000. One is a Treasury note paying an annual coupon of 5.06 percent. The...

A stock has a required return of 11 percent; the risk-free rate is 7 percent; and the market risk premium is 4 percent. A) What is the stocks beta? B) If the market risk premium increased to 6...

I need help with these finance questions ASAP (Please zoom picture if not too clear): Attempts Keep the Highest / 3 4. Problem 8.05 Click here to read the eBook: The Relationship Between Risk and...

Click here to read the eBook: The Relationship Between Risk and Rates of Return BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%; the risk-free rate is 5.5%; and the market risk...

4. Problem 8.05 Click here to read the eBook: The Relationship Between Risk and Rates of Return BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%; the risk-free rate is 5.5%; and...

BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%; the risk-free rate is 5.5%; and the market risk premium is 3%. What is the stock's beta? Round your answer to two decimal...

Problem 8-5 Beta and required rate of return A stock has a required return of 11%; the risk-free rate is 6.5%; and the market risk premium is 4%. What is the stock's beta? Round your answer to two...

Problem 8-5 Beta and required rate of return A stock has a required return of 11%; the risk-free rate is 2.5%; and the market risk premium is 4%. What is the stock's beta? Round your answer to two...

Beta and required rate of return A stock has a required return of 11%; the risk-free rate is 2.5%; and the market risk premium is 6%. What is the stock's beta? Round your answer to two decimal...

On January 1, 2020, X-Man Corp. signed a ten-year non-cancellable lease for new machinery. The terms of the lease called for X-Man to make annual payments of $100,000 at the end of each year for ten...

Explain the Triffin Dilemma and how the events of the 1960s demonstrated the problem. Could the US and other participating countries have prevented the collapse of the BW Regime and if so why? If...

Use this discounted cash flow diagram to estimate the discounted pay back period. Draw and mark up a rough sketch on your handwritten notes in order to earn any partial credit. Cash Flow Diagram

One of the fundamental principles of economics is that returns eventually diminish. Explain what this means and show how it applies to consumption, production, and at least one other area (unrelated...

Speculate on at least three (3) accounting problems that exist under U.S. GAAP related to interim financial reports. Next, suggest at least one (1) approach to overcome each listed problem. Provide a...

Use the Online Consumer Purchasing Model, Figure 6.11 in Chapter 6, to assess the effectiveness of an e-mail campaign at a small website devoted to the sales of apparel to the young adult market...

Create the statement of cash-flow with indirect method Interpret the result of the statement of cash flow with percentage Required: 1. Use the balance sheet as follows to classify each activity...

Liquidated damages means an amount of the .. that may result from the breach of contract. (i) actual loss (iii) pre-estimated probable loss (ii) loss suffered (iv) pre-estimated actual loss

Installment-Sales Computation and Entries'Periodic Inventory Mantle Inc. sells merchandise for cash and also on the installment plan. Entries to record cost of goods sold are made at the end of each...

Installment Repossession Entries selected transactions of TV Land Company are presented below. 1. A television set costing $540 is sold to Jack Matre on November 1, 2010, for $900. Matre makes a down...

Installment-Sales Computations and Schedules Saprano Company, on January 2, 2010, entered into a contract with a manufacturing company to purchase room-size air conditioners and to sell the units on...

Assume the following information: Assume the equivalent units of production for materials and conversion are 5,200 units and 5,000 units, respectively, using the weighted-average method. If 4,630...

calculate the missing numbers from the yellow cells. Dooley, Inc., has outstanding $100 million bonds that pay an annual coupon rate of interest of 10.5 percent. Par value of each bond is $1,000. The...

The spot price of gold is currently $1,694/oz, while the 4 -month forward price is $1,729/oz. If gold has no convenience yield, what is the implied repo rate? Express the implied repo rate in % with...