Question: If the expected return for a given stock is 5%, the risk-free rate is 2% and the market risk premium is 3% then what would

If the expected return for a given stock is 5%, the risk-free rate is 2% and the market risk premium is 3% then what would be the beta for this stock according to the CAPM model?

A. 1

B. 6

C. 0.5

D. 4

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!

1. Suppose a company has $10 million in book value of debt that trades at 96% of its face value. In addition, the company has $15 million dollars in book value of equity. The company's current stock...

If the expected return for a given stock is 5%, the risk-free rate is 2% and the market risk premium is 3% then what would be the beta for this stock according to the CAPM model? A. 1 B. 0.5 C. 6 D. 4

The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that...

Common Stock Valuation Find the value of XYZ common stock given: dividend pald last week $2 per share, growth rate projected for next year to be 20%, growth rate for year two 15%, growth rate for...

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 40% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 20.0% standard...

Excel Online Structured Activity: Evaluating risk and return Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 30% standard deviation of expected returns. Stock Y has a 12.0%...

Excel Online Structured Activity: Evaluating risk and return Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 30% standard deviation of expected returns. Stock Y has a 12.5%...

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 40% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 25.0% standard...

Evaluating risk and return Expected return of Stock X 10.00% Beta coefficient of Stock X 0.90 Standard deviation of Stock X returns 35.00% Expected return of Stock Y 12.50% Beta coefficient of Stock...

Evaluating risk and return Expected return of Stock X 10.00% Beta coefficient of Stock X 0.90 Standard deviation of Stock X returns 40.00% Expected return of Stock Y 12.00% Beta coefficient of Stock...

The compound beam below has an shear release just to the left of C and a moment release just to the right of C. A plot of the moment diagram is provided below for applied load P at B and triangular...

5. You are a Technologist at casting station at University of Johannesburg. You have been given a task to conducted casting experiment to determine total heat required to accomplish the casting. In...

Governments h . Sales taxes earmarked for debt service of $ 3 5 0 , 0 0 0 were collected. i . Central Paving and Construction submitted a progress billing to the town for $ 2 , 5 0 0 , 0 0 0 . The...

w What is the payback period for the following set of cash flows? Year Cash Flow -year 0 $ 5,000 year1 1,900 year 2 1,500 year 3 2,000 year 4 2,600

3. Might a policymaker choose a steady state with more capital than in the Golden Rule steady state? Might a policymaker choose a steady state with less capital than in the Golden Rule steady state?...

4. In the Solow model with population growth and technological progress, at the Golden Rule steady state, the marginal product of capital MPK equals a. n. b. g. c. n + g. d. n + g + .

5. The purpose of growth theory is to explain technological progress. Some of these models do so by questioning the Solow models assumption of returns to capital. a. endogenous, diminishing b....