1.Consider the following information on Stocks I and II:

The market risk premium is 8 percent, and the risk-free rate is 3.6 percent. The beta of stock A is _____ and the beta of stock B is _____.

The stock of Holiyay Products is selling for $24 a share before the stock goes ex-rights. The company has decided to raise funds through a rights offering wherein every shareholder will receive one for 3 rights issue at subscription price of $10. What is the value of one right?
 

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Probability of State of Economy 0.06 State of Economy Recession Normal Irrational exuberance 0.25 0.69 Rate of Return if State Occurs Stock A Stock B 0.15 -0.35 0.35 0.35 0.43 0.45 Probability of State of Economy 0.06 State of Economy Recession Normal Irrational exuberance 0.25 0.69 Rate of Return if State Occurs Stock A Stock B 0.15 -0.35 0.35 0.35 0.43 0.45

Answer rating: 100% (QA)

To calculate the beta of stock A and stock B we can use the market risk premium and the riskfree rat... View the full answer