Your broker has developed a list of firms, their betas, and the return he expects the...
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Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Firm Beta Expected Return Anderson, Inc. 0.90 10.5% Delta Vanlines 1.25 13.0% 1.60 16.0% Nathan's Bakeries Z-man Electronics Delta Vanlines 1.90 19.0% All of the stocks Nathan's Bakeries Z-man Electronics Anderson, Inc. Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Firm Beta Expected Return Anderson, Inc. 0.90 10.5% Delta Vanlines 1.25 13.0% 1.60 16.0% Nathan's Bakeries Z-man Electronics Delta Vanlines 1.90 19.0% All of the stocks Nathan's Bakeries Z-man Electronics Anderson, Inc.
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To determine which stock you should purchase based on the Capital Asset Pricing Model CAPM you can c... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
Posted Date:
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