Question: Company Glasses Co. Contact Inc. E(r) 14% 13% Std Dev 17% 19% Beta 1.7 1 Here are data on two companies. The T-bill rate is

Company	Glasses Co.	Contact Inc.
E(r)	14%	13%
Std Dev	17%	19%
Beta	1.7	1

Here are data on two companies. The T-bill rate is 5.8% and the market risk premium is 7.4%.

What would be the fair return for each company, according to CAPM? Are they over, under, or fairly priced? What is each firms alpha, and which is the best buy?

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!

In Jennifer Bellins leadership conference project (Problem 34 in Chapter 11), suppose that the activity times are uncertain. Estimated ranges for these times are shown in the table below. Develop a...

Here are data on two companies. The T-bill rate is 5.8% and the market risk premium is 7.4%. Company Glasses Co Contact Inc. E(r) 14% 13% Std Dev 17% 19% Beta 1.7 1 What would be the fair return for...

can you please help me out with this assignment case study with the question ? UVA-F-1553 CALIFORNIA PIZZA KITCHEN Everyone knows that 95% of restaurants fail in the first two years, and a lot of...

i am taking Cooperate finance which is FIN222 can help me to answer.. ? Tutorial 1 Topic 1 Chapter 1 4. What are the main advantages and disadvantages of organising a firm as a corporation? 6. You...

A602 financial analysis template (colgate-Palmolive) I only need help with Common size and Financial Ratio. Note: Use care not to delete, hide or reorder workbook tabs (worksheets) in this workbook....

Argo Airlines, a privately held firm, is looking to buy additional gates at its home airport for $635,000 Argo has $200,000 in the bank but that money may not be spent as it is used to pay salaries,...

Please explain question #12. attached document with the document is provided. For problems 12-16, assume that you manage a risky portfolio with an expected rate of return of 17% and a standard...

I am looking for the correct answer for this Q .. Can you help me :) I need also steps with Calculatorplz Thanks....

I need the answer of question number 5 and 6. I need specific process of the solutions. Homework 3 UNIVERSITY OF MINNESOTA ECON 4751 - Financial Economics Due Thursday, February 25, 2016...

1. a. If the electrical conductivity of aluminum is 3.8 107/Nm, estimate it's thermal conductivity at T = 293K (Lorentz number/ constant 2.20 10-8WN K-) b. The resistivity of the most useful metal...

The p.d.f. is f(x) = 1 - x/2 for 0 x 2. Find and sketch the c.d.f. associated with the given p.d.f. and check that it increases to a value of 1.

Some risk - avoidance hedge funds follow a Blank _ _ _ _ _ _ strategy, investing in securities perceived to be selling at deep discounts relative to their intrinsic values.

Which of the following are problems with identifying users of ABC? Multiple select question. ABC means different things to different organizations. Organizations will announce the discontinuance of...

What do you think of social media as a recruitment tool? Give an example of this activity.

Of the building blocks in the competency model, which competency level is the most important and why?

Discuss different selection tests. Have you ever taken a selection test? Do you think these tests are a good way to select employees? Defend your answer. cussion Boards