Question: Write the CAPM equation and Use the CAPM equation to value a stock with a beta of 1.5 if the expected market return on the

Write the CAPM equation and Use the CAPM equation to value a stock with a beta of 1.5 if the expected market return on the market is 9% and the risk free rate is 3%. Please show your work.

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!

26. You analyze Samsung stock, find its beta 1.3, the expected market return 4% and the risk-free rate 1% Accords to CAPM, what is Samsung's expected return? A. 6.2% B.5.2% C.A.9% D. 3.9% 27. About...

24-2. Fill the missing number in Cell E4. A. $941.13 B. $980.12 C. $981.13 D. $986.54 $1,005.41 24-3. A speculator purchased the band for $946.54 at issuance, pocketed in the first coupon at 1 and...

ch d) 24-2. Fill the missing number in Cell E4. A $941.13 B. $980.12 C $981.13 . $986.54 $1,005.41 24-3. A speculator purchased the bond for $946.54 at issuance, pocketed in the first coupon at tel...

QUESTION 1 ABC Inc, a publishing company is considering investing in a new press. For the purpose of your valuation, limit the projects life to 5 years. The press will cost $1000000, will required...

QUESTION 2. Remember that just like projects, bonds, or any other asset, the intrinsic value (fair value of any asset) is just the present value of all of its future cash flows. For stocks, these...

than YTM for his 1-year holding period. What must be the YTM for the buyer who took over the bond from the speculator, assume this buyer holds the bond for the remaining 2 year till maturity? Select...

42. Fill the missing number in Cell E4 A. $941.13 B. $980.12 C.$981.13 D. $986.54 E. $1,005.41 24-3. A speculator purchased the bond for $946.54 at issuance, pocketed in the first coupon at 1 and...

principles of finance questions attached along with a supplement for the questions INT'L BUS. MACH. NYSE-IBM TIMELINESS SAFETY TECHNICAL 2 1 3 High: Low: Raised 8/2/13 126.4 54.0 RECENT PRICE 94.5...

10. The table below shows information for 3 stocks Risk and rates of return Page 4 of 4 Security Beta Risk-free rate Expected market return Stock 1 1.8 Stock 2 1.2 Stock 3 0.6 0.02 0.035 0.015 0.06...

QUESTION 1 Use the CAPM equation to find the return for security 1, which has a Beta of 1.7. Assume the market return is expected to be 12% and the risk free rate is 3.4%. (Please write the return in...

A company is considering an investment project with the following cash flows: Year 1: -$50,000 (initial investment) Year 2: $20,000 Year 3: $25,000 Year 4: $30,000 Calculate the payback period and...

5. Using Castigliano's theorem, find the deflection at point B of the beam shown in figure below. Take El is constant through the length. (QB Ans: AB-7PL/768E1) VIV

The purpose of risk response is to: Implement a risk management framework and process for managing risks. Alter levels of risk inconsistent with risk appetite, risk tolerance. Meet stakeholder...

Northeastern Insurance Company is considering opening an office in the U. S. The two cities under consideration are Philadelphia and New York. The factor ratings ( higher scores are better) for the...

Humans produce only humans. (a) Life is organized. (b) Living things reproduce and grow. (c) Living things respond to stimuli. (d) Living things have an evolutionary history. (e) Living things...

In Myanmar (formerly Burma), 6 laborers, each making the equivalent of $ 3 per day, can produce 40 units per day. In rural China, 10 laborers, each making the equivalent of $ 2 per day, can produce...

Patty Schemelenberg, a 45-year-old woman, wishes to accumulate $300,000 over the next 15 years to supplement the retirement programs that are being funded by the federal government and her employer....

Two welfare located 100 m apart in a confined aquifer with a transmissivity T = 2 ( 10 -4 m2/s and storativity S = 7 ( 10 -5.One well to the west is pumped at a rate of 6.6 m7hr and the other to the...

Tori and some other childeen experimented with balls to see which ones rolled. First using a piece of cardboard to use as a ramp, they angled it on a block to the floor to test the balls. Then Tori...

Rimham plc prepares its budgets annually and as the accountant you are responsible for this task. The following standard data is available: Material content Product X Product Y Product Z kg kg kg...

identify the causes of labour, material, overhead and sales margin variances; LO1

construct a departmental performance report; LO1