Consider a stock with expected return of 12%. Treasury bills currently yield 4%. The expected return on

Fantastic news! We've Found the answer you've been seeking!

Question:

Consider a stock with expected return of 12%. Treasury bills currently yield 4%. The expected return on the market portfolio is 7%. What is the risk premium on this stock? explain

Related Book For answer-question

Practical financial management

ISBN: 978-0324422634

5th Edition

Authors: William r. Lasher

See More Books

Posted Date: Feb 27, 2024 07:34 AM

See More Questions

CoursHeroTranscribedText: A 5-year loan in the amount of $48,000 is to be repaid in equal annual payments. What is the remaining principal balance after the third payment if the interest rate is 5...
Taunton Construction Inc.s capital situation is described as follows. Debt: The firm issued 10,000 25-year bonds 10 years ago at their par value of $1,000. The bonds carry a coupon rate of 14% and...
Problem 23 in Chapter 8 concerned the Rollins Metal Company, which is engaged in long-term planning. The firm is trying to choose among several strategic options that imply different future growth...
Hardie Lord, Helen Murvis's boss, is not convinced that Helen used the correct decision technique. Hardie believes that Helen should use a coefficient of realism of 0.75 in determining the best...
The human brain consumes about 22 W of power under normal conditions, though more power may be required during exams. (a) For what amount of time can one Snickers bar (see the note following Problem...
By trial and error, a frog learns that it can leap a maximum horizontal distance of 1.30 m. If, in the course of an hour, the frog spends 20.0% of the time resting and 80.0% of the time performing...
What is the role of HR professionals in information security and privacy management?
a. What is the aim of a long (or bottom) straddle strategy? b. Create a long straddle by buying a call and a put with strike price K3 = $22.50.
If you took $450,000 mortgage loan to be repaid over 30 years at 7.0%, calculate the amount of principal reduction in the first year.
Computer Service and Repair was started five years ago by two college roommates. The company's comparative balance sheets and income statement are presented below, along with additional information....
A company is thinking about dropping one of its product lines. The monthly income statement for the product line is below: Revenue $ 1 0 0 , 0 0 0 Variable Costs $ 4 3 , 0 0 0 Salary of Product Line...
In Vroom's formula, nonchalance instrumentality 0000 valence expectancy refers to a person's perception of his or her ability (probability) to accomplish an objective.
Risk-free rate is 3% market risk premium is 4%, corp tax rate is 24%, the company stock beta 1.28, share price is $239, shares outstanding is 100,000,000. What is the total market value of Airbnb's...
The integrated disclosure rules for lenders rules lender ( TRID ) request ? a ) Truth in lending form and a loan estimate form b ) loan estimate form and closing disclosure form c ) Good faith...
Suppose one-year LIBOR is forecasted to fluctuate as follows: Year 1: 5.0% Year 2: 5.5% Year 3: 6.0% Year 4: 7.0% Year 5: 7.5% Determine the fixed swap rate for 5-year $100-million interest rate...
Assess the impact of artificial intelligence on decision-making processes within business management. Explore how machine learning algorithms, predictive analytics, and automation are influencing...
Determine the domain of the ff. table below. Function Domain y = tan x y = cot x y = 3 tan x y = -2 cot x y = (tan x) + 2
Michelles trust is subject to 3.8% surtax on the lesser of the trusts net investment income or the excess of the trusts adjusted gross income over the $12,400 threshold (the highest trust tax rate)....
Whats the difference between a direct and an indirect transfer of money between investors and firms?
Assume Schoen Industries of the last problem is subject to income tax at a rate of 40%. a. Recalculate the value of the firm assuming there is no tax shield associated with debt and compare it to the...
You are a financial analyst for the Ajax Company, which uses about $1 million of inventory per month. The purchasing manager has come to you for help with a buying decision. He can get a big discount...
Victoria has prepared the following list of statements about corporations. 1. A corporation is an entity separate and distinct from its owners. 2. As a legal entity, a corporation has most of the...
Indicate whether the following items would appear on the income statement (IS), statement of financial position (SFP), or retained earnings statement (RES). a. Dividends. b. Cash. c. Salaries and...
Victoria has studied the information you gave her in that exercise and has come to you with more statements about corporations. 1. Corporation management is both an advantage and a disadvantage of a...

Consider a stock with expected return of 12%. Treasury bills currently yield 4%. The expected return on

Question:

Expert Answer:

The risk premium on a stock is the excess return it offers over the riskfree rate T... View the full answer

Practical financial management

Students also viewed these finance questions