Question: You estimate the expected return on a stock to be 10%. The required rate of return on this stock is 12%. The stock has a

You estimate the expected return on a stock to be 10%. The required rate of return on this stock is 12%. The stock has a standard deviation of 25% and a beta of 1.2. Which of the following is correct. This is a good investment since it is required to return 12% for investors This is a bad investment since the expected return is less than the required return The stock is a bad investment because it has a beta greater than one

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!

Question 10 (2 points) You estimate the expected return on a stock to be 10%. The required rate of return on this stock is 12%. The stock has a standard deviation of 25% and a beta of 1.2. Which of...

You estimate the expected return on a stock to be 10%. The required rate of return on this stock is 12%. The stock has a standard deviation of 25% and a beta of 1.2. Which of the following is...

The stock of Business Adventures sells for $30 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Boom Normal economy...

Question 1 (20 points): Johnson \& Johnson (JNJ) see link has been trading $120 to 180 range since March 2020 and currently priced at 166.JNJ is a large health care conglomerate. It has done well...

Stock A's expected return and standard deviation are E[ra] = 10% and a = 18%. Stock Z's expected return and standard deviation are E[rz] = 7% and Oz = 12%. If the weights in your portfolio are 45%...

Tutorial : Risk and return Case Study 2 You have decided to purchase a commercial van for your company. You are looking at two brands Handa and Tayata. Both brands will provide similar benefits over...

pleas , Write the formula before solving the question 1. The following table shows the scenario analysis for Sabic's sock: HPR (%) Scenario Severe recession Mild recession Normal growth Probability...

E. Suppose the expected return on the market is 12 percent, the risk-free rate is 4 percent and the standard deviation for the market is 2 percent. Required: i. Calculate the expected rate of return...

Based on CAPM, the expected return on a stock is affected by the: (1.) stock's beta. (II.) market return. (III.) standard deviation. (IV.) risk-free rate. I and III only II and IV only I, II, and IV...

Please help, this is review question i do not understand E F H I j L M N O P Q B D 1 Return of Return of 2 Economy Probabilit Stock A Stock B 3 Weak 15% -35% -25% 4 Average 55% 12% 14% 5 Strong 30%...

-11 The process of becoming older, a process that is environmentally determined and genetically modulated. ed out of Select one: O a. False question O b. True

Tectonic Plating Inc. is considering a new five year engineering system that requires an initial fixed asset investment of $113,000, and it will save an estimated 330,000 kilowatt-hours (kWh) of...

Suppose that you are considering investing in one of two companies, each in the same industry. The most recent income statements for each company and other relevant information are as follows:...

Which of the following set of topics is the best choice for an introduction when presenting to an audience that is hostile toward your idea? Importance / relevance , recommendation, agenda Hook, Why...

Identify ways to increase your selfesteem.

1. If Ms. Perez displays the characteristics of the Director communication style, how should Eric conduct himself during the meeting? Be specific as you analyze those behaviors that would be admired...

2. Lets assume you are a marketing representative for the Southwestern Region of the American Red Cross. You plan to schedule separate meetings with Gates and Ballmer to solicit major funding for...