A stock with a beta of 0.9 has an expected rate of return of 10%. If this

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Question:

A stock with a beta of 0.9 has an expected rate of return of 10%. If this year's market return turns out to be 8 percentage points below expectations, what is your best guess as to the stock's rate of return? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.)

A stock with a beta of 0.84 now sells for $59. Investors expect the stock to pay a year-end dividend of $4. The Treasury bill rate is 3% and the market risk premium is 6%. If the stock is perceived to be fairly priced today, what should investors expect about the stock's price at the end of the year? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

The risk-free rate is 6% and the expected rate of return on the market portfolio is 11%.

to. Calculate the required rate of return on a security with a beta of 1.38. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.)

b. If the security is expected to return 13%, is it overvalued or undervalued?

underrated

Too expensive

A stock with a beta of 0.78 is now selling for $58. Investors expect the stock to pay a year-end dividend of $2. The Treasury bill rate is 5% and the market risk premium is 8%.

to. Suppose investors believe the stock will sell for $60 at the end of the year. Is the stock a good or bad buy? What will investors do?

The stock is a buy _______ and investors________.

c. At what price will the stock reach an “equilibrium” at what is perceived to be a fair price today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

We Do Bankruptcies is a law firm that specializes in providing advice to companies in financial difficulty. It thrives in downturns when other businesses are struggling. Consequently, its beta is negative, −0.3.

to. If the interest rate on treasury bills is 6% and the expected return on the market portfolio is 16%, what is the expected return on the law firm's stock based on the CAPM? (Enter your answer as a full percentage.)

d. Suppose he invested 90% of his wealth in the market portfolio and the rest of his wealth in the law firm's stock. What would be the beta of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)