Question: Using CAPM A stock has an expected return of 13 percent, the risk-free rate is 4.5 percent, and the market risk premium is 7 percent.

Using CAPM A stock has an expected return of 13 percent, the risk-free rate is 4.5 percent, and the market risk premium is 7 percent. What must the beta of this stock be?

Step by Step Solution

★★★★★

3.47 Rating (170 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

We are given the values for the CAPM except for the of the stock We need to substitute t... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

29-B-C-F-R-A-R (55).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Using CAPM A stock has an expected return of 10 percent, its beta is .70, and the risk-free rate is 5.5 percent. What must the expected return on the market be?

Using CAPM A stock has an expected return of 15 percent, its beta is 1.45, and the expected return on the market is 12 percent. What must the risk-free rate be?

A stock has an expected return of 13.4 percent, its beta is 1.60, and the risk-free rate is 5.5 percent. What must the expected return on the market be?

Accorsi & Sons specializes in selling and installing upscale home theater systems. On March 1, 2024, Accorsi sold a premium home theater package that includes a projector, set of surround speakers,...

5. Using CAPM. A stock has an expected return of 15%, the risk-free rate is 4%, and the market risk premium is 8%. What must the beta ( () of this stock be? 6. Using CAPM. A stock has an expected...

14. Using CAPM. A stock has an expected return of 11.4 percent, the risk-free rate is 3.7 percent, and the market risk premium is 7.1 percent. What must the beta of this stock be? 15. Using CAPM. A...

1 1. Using CAPM A stock has an expected return of 13.4 percent, the risk-free rate is 3.8 percent, and the market risk premium is 7 percent. What must the beta of this stock be? [Hint: Expected...

i am confused about why the second rf value is not factored in i got a differenr answer 11.14 Using CAPM. A stock has an expected return of 11.4 percent, the risk-free rate is 3.7 percent, and the...

Chapter 11 - End of Chapter Questions and Problems - Question 14 O 1.13 1.55 1.73 1.80 1.93 PART 6 Risk and Return LOA 14. Using CAPM A stock has an expected return of 11.4 percent, the risk-free...

Problem 1 1 - 1 3 Using CAPM A stock has an expected return of 1 2 . 4 percent, the risk - free rate is 6 . 5 percent, and the market risk premium is 1 0 percent. What must the beta of this stock be...

In computing ROI, land held for future use Select one: O a. is considered a nonoperating asset. O b. is important in evaluating the performance of a profit center manager, will hurt the performance...

Safa is planning to have a retirement income of $2,000 at the end of every month.For the first 10 years that she is retired and then increase it to $3,000 per month for the next 20 years. If her...

Define and give an example of the law of diminishing returns.

A quant jock from your firm used a linear demand specification to estimate the demand for its product and sent you a hard copy of the results. Unfortunately, some entries are missing because the...

The balance sheet for Lakeland Corporation as of December 31, 2011, is as follows: During 2012, the following transactions were completed in the order given: a. Lakeland reacquired 750 shares of...

Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has...

You are the manager of Local Electronics Shop (LES), a small brick-and-mortar retail camera and electronics store. One of your employees proposed a new online strategy whereby LES lists its products...

K. Meissner, S. Cohen, and E. Hughes are forming a partnership. Meissner is transferring $50,000 of personal cash to the partnership. Cohen owns land worth $15,000 and a small building worth $80,000,...

Determine which of the following risk management techniques can hedge the financial risk of an oil producer arising from the price of the oil that it sells. I. Short forward position on the price of...

In the context of capital budgeting, what is capital rationing?

Provide two conditions under which a set of projects might be characterized as mutually exclusive.

a. A firm invests in a project that is expected to earn a return of 12 percent. If the appropriate cost of capital is also 12 percent, did the firm make the right decision? Explain. b. What is the...

Page\ 2\ of 3\ 1\ Options, Futures and Other Derivative Securities\ FINE 4800A, Fall 2023\ Individual Assignment #2\ Due on Dec. 8 at 11:59pm (EST/Toronto local time)\ Important:\ Your assignment can...

A 5 % semi - annual pay $ 1 0 0 0 bond matures in 4 years. What is the YTM if the price is $ 1 , 0 6 9 ? I do not want this answer to be solve by YTM on a semi - Annual bond but instead doing it by...

Tech Engineering Company is considering the purchase of a new machine to replace an existing one. The old machine was purchases 4 years ago at a cost of $8,000, and was being depreciated over 8 years...