Question: 1a) Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.1 is 20%.

1a) Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.1 is 20%. What is the risk-free rate?

1b) UPS, a delivery services company, has a beta of 1.5, and Wal-Mart has a beta of 0.5. The risk-free rate of interest is 6% and the market risk premium is 9%. What is the expected return on a portfolio with 30% of its money in UPS and the balance in Wal-Mart?

a) 13.20%

b) 12.94%

c) 12.54%

d) 13.86%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Please provide excel spreadsheet detailing how you got to the multiple choice answer. I am trying to get ahead and understand each of the practiceproblems in prep for a exam so it would be very...

(3) (5 points) Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate? A) 2% B) 6% C)8% D) 12% (4) (5...

Questions 33-36 please 33. Historically, small-firm stocks have earned higher returns than large-firm stocks. When viewed in the context of an efficient market, this suggests that A. Small firms are...

2. A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 25% while stock B has a standard deviation of return of 5%. Stock A comprises 20% of the portfolio...

Consider the following two investment alternatives: First, a risky portfolio that pays a 15% rate of return with a probability of 40% or a 5% rate of return with a probability of 60%. Second, a...

Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate? Answer in %.

need help thanks 4. Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate? (Provide numerical answer to 2...

Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate? 12% -8% 5% 1%

please show work Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.3 is 20%. What is the risk-free rate

2. Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate?

Rossiter Fittings produces two models of pipe fittings for underwater lines. The two models (RF-12 and RF-25) have the following characteristics, as developed by a product cost analyst: Selling price...

(a) By finding appropriate solutions of the radial equation in part b of Problem 2.17, find the Green function for the interior Dirichlet problem of a cylinder of radius b [g m (?, ?' = b) = 0. See...

14.68 When a dummy variable is included in a regression model that has one numerical independent variable, what assumption do you need to make concerning the slope between the dependent variable, Y,...

Create a Positioning Statement for Dollar General

=+(Okay, great), idiomatic expressions (See what I mean?), vernacular phrases (Gotta go), contractions (I'm runnin' late), and connectors (Yeah, but).

=+were the targeted audience's age. Now, is that message you're writing appropriate for that age group? Is the tone of voice the best one to use?

=+2. Become the consumer Ask yourself what would make you buy that product? Remember to consider how you would feel and think if you