Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has
Question:
Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the risk-free rate is 3.2 percent and the market risk premium is 6.8 percent, are these stocks correctly priced?
Step by Step Answer:
Yes these stocks are correctly priced The expected ...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Related Video
Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
Students also viewed these Business questions
-
Stock Y has a beta of 1.25 and an expected return of 14 percent. Stock Z has a beta of .70 and an expected return of 9 percent. If the risk-free rate is 6 percent and the market risk premium is 7...
-
Stock Y has a beta of 1.35 and an expected return of 14.2 percent. Stock Z has a beta of .75 and an expected return of 9.1 percent. If the risk-free rate is 4.3 percent and the market risk premium is...
-
Stock Y has a beta of 1.15 and an expected return of 12.6 percent. Stock Z has a beta of .83 and an expected return of 9.5 percent. If the risk-free rate is 4.3 percent and the market risk premium is...
-
Let U = {1, 2, 3, 4,p, 10} A = {1, 3, 5, 7} B = {3, 7, 9, 10} C = {1, 7, 10} Determine the following. A - B
-
You slowly add ammonia, NH3, to 1.00 L of water containing 5.00 g of solid nickel(II) iodate, Ni(IO3)2. How much ammonia (in moles) would you have to add to just dissolve the nickel(II) iodate? What...
-
Choose one of the following manufacturers (or any manufacturer of your choosing), and use the Internet to gather information about any new products the company has recently introduced or plans to...
-
Basis of differentiation is part of the Barringer/Ireland Business Model Template. We define this term in this chapter as what causes consumers to pick one companys products over anothers. What is...
-
Farrow Co. expects to sell 150,000 units of its product in the next period with the following results. Sales (150,000 units) . . . . . . . . . . . . . . $ 2,250,000 Costs and expenses Direct...
-
1. A scientific committee is to be formed form 6 Indians and 8 foreigners, which includes at least 2 Indians and double the number of foreigners as Indians. Then the number of ways the committee and...
-
Santana Rey created Business Solutions on October 1, 2019. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up...
-
A stock has a beta of 1.19 and an expected return of 12.4 percent. A risk-free asset currently earns 2.7 percent. a. What is the expected return on a portfolio that is equally invested in the two...
-
Asset W has an expected return of 8.8 percent and a beta of .90. If the risk-free rate is 2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the...
-
Rabby Computer Inc agreed to design a networking system for Pendulum Publishing Ltd. The contract called for Pendulum to pay $50 000 after Rabby completed its performance. However, when Rabby...
-
Year System 1 System 2 0 -$15,500 -$43,200 1 15,500 30,700 2 15,500 30,700 3 15,500 30,700 Calculate NPV. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or...
-
I need help with discussion question Corporations are obviously not biological entities. However, the law finds it necessary to provide corporations with certain rights and responsibilities commonly...
-
An electromagnetic wave has energy of 9.9410^ -20J. Determine the wavelength In which region of the electromagnetic spectrum does the radiation fall under
-
Write a program that, given a month and year, prints a calendar, such as June 2016 Su Mo Tu We Th Fr Sa 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 To find out...
-
BL - Corporate Finance and Securities Regulation Based on our materials, list the two (2) federal securities laws that corporations must comply with when selling shares to public investors. State...
-
(i) Show the equivalence of the Euclidean norm and the 1 norm on Rn by proving ||v||2 ||v|| n ||v||2. (ii) Verify that the vectors in Exercise 3.3.31 satisfy both inequalities. (iii) For which...
-
A Alkynes can be made by dehydrohalogenation of vinylic halides in a reaction that is essentially an E2 process. In studying the stereochemistry of this elimination, it was found that...
-
What is the payback period for the following set of cash flows? Year Cash Flow 0 $6,700 1 2,800 2 3,200 3 2,200 4 1,400
-
Zayas, LLC, has identified the following two mutually exclusive projects: a. What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept?...
-
Consider the following two mutually exclusive projects: Sketch the NPV profiles for X and Y over a range of discount rates from 0 to 25 percent. What is the crossover rate for these two projects?...
-
Visionary leadership: How do you envision the future of business in the United States and Worldwide in the next 5-10 years?
-
Project Management Example 1 CPM with Single Time Estimates Use this simple project information to answer the following questions: Task Estimated Duration Immediate Predecessors A 1 0 days None B 7...
-
Four channels are multiplexed using TDM. If each channel sends 100 bytes /s and we multiplex 5 bits per channel. i. Show the frame (at least three) traveling on the link with arbitrary data ii. The...
Study smarter with the SolutionInn App