Suppose that the Treasury bill rate is 4% and the expected return on the market stays at 9%. Use the following information.

Stock	Beta (?)
Caterpillar	1.68
Dow Chemical	1.63
Ford	1.42
Microsoft	0.96
Apple	0.93
Johnson & Johnson	0.55
Walmart	0.47
Campbell Soup	0.37
Consolidated Edison	0.19
Newmont	0.00

a. Calculate the expected return from Johnson & Johnson. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Expected return             %

b. Find the highest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Highest expected return             %

c. Find the lowest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Enter your answer as a percent rounded to the nearest whole number.)

Lowest expected return             %

d. Would Ford offer a higher or lower expected return if the interest rate were 2% rather than 4%? Assume that the expected market return stays at 9%.

	Higher
	Lower

e. Would Walmart offer a higher or lower expected return if the interest rate were 8% rather than 4%? Assume the expected market return stays at 9%.

	Higher
	Lower

Answer rating: 100% (QA)

To calculate the expected return from Johnson Johnson we will use the Capital Asset Pricing Model CAPM formula Expected Return Treasury bill rate Beta ... View the full answer