A stock has a beta of 1.25, the expected return on the market is 12 percent, and

Question:

A stock has a beta of 1.25, the expected return on the market is 12 percent, and the risk-free rate is 5 percent. What must the expected return on this stock be? Assume the CAPM holds.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Corporate Finance

ISBN: 9781259270116

8th Canadian Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Roberts, Hamdi Driss

See More Books

Question Posted: Oct 29, 2020 07:29 AM

See More Questions

This case study on project evaluation is applicable for beginning courses in corporate finance or finance strategy. Two alternative investment options are available to evaluate. Challenges are...
The following table shows the 2020 revenues from three customers of a manufacturer. The sales staff has permission to grant discounts on the list price of $500 per unit if customers place large...
Assume the risk-free rate is 2% (rf = 2%), the expected return on the market portfolio is 6% (rM = 6%) and the standard deviation of the return on the market portfolio is 15% (M = 15%). Assume the...
If the interest rate on debt is lower than ROA, then a firm will Valitse yksi: a. increase ROE b. not change ROE c. none of these is correct d. decrease ROE e. change the ROE in an indeterminable...
(a) Apply Hake's Theorem to conclude that g(x) := 1/x2/3 for x [0, 1] and g(0) := 0 belongs to R*(0, 1). (b) Explain why Hake's Theorem does not apply to f(x) := 1/x for x (0, 1) and f(0) := 0...
Consumers Union measured the gas mileage in miles per gallon of 38 vehicles from the same model year on a special test track. The pie chart provides information about the country of manufacture of...
1. What are the three steps to assess the impact of nonoperating expenses and one-time charges on cash flow projections?
Alfonso Sheen recently opened his own accounting firm, which he operates as a corporation. The name of the new entity is Alfonso Sheen, CPA. Sheen experienced the following events during the...
A sole trader operates his business from a warehouse which has been damaged by a fire which occurred at the end of the financial year.After the fire the remaining inventory that is undamaged amounts...
The following code is a slightly modified version of actual code that was in the Microsoft Zune music player in 2008. The code attempts to calculate todays date by determining how many years and days...
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.65 and the total portfolio is equally as risky as the market, what must the beta be for...
A stock has an expected return of 10.2 percent, the risk-free rate is 4 percent, and the market risk premium is 7 percent. What must the beta of this stock be? Assume the CAPM holds.
In the journal article "The 2003-2004 Russian Elections and Prospects for Democracy" (Europe-Asia Studies, Vol. 57, No. 3, pp. 369-398), R. Sakwa examined the fourth electoral cycle that independent...
Caching. CPUs. Hard disk drives. Parallelism. Pipelining. RAM. Registers. Solid-state drives. Dinkleberg 1. (3 points) You know that neighbor who always one-ups you? Apparently, he just bought a...
Information for Question 1 and 2: The National Health Interview Survey is an annual national health survey of people living in about 35,000 randomly selected households in the United States. On the...
Q1. There is trampoline on the ground, and connected to spring of spring constant, k, on the bottom. You are holding a child of mass, M on a H tall building top (H is measured from the trampoline to...
SPSS for intermediate statistics extra problems solutions d. Approximately how much variance in consumers' tendency to purchase the product could be predicted from these variables? If you owned the...
A finance company uses the discount method of calculating interest. The loan principal is $5,000, the interest rate is 10%, and repayment is expected in two years. You will receive 4196.25 X from the...
Evaluate the integrals in Problem. x 3 /e 4x4 dx
Find the area of the surface generated by revolving the para- metric curve x = cos 1, y = sin? 1 (0 < I sa/2) about the y-axis.
Preparing a Balance Sheet Prepare a 2007 balance sheet for Haltiwanger Corp. based on the following information: cash = $210,000; patents and copyrights $720,000; accounts payable = $430,000;...
Residual Claims Clappers Clippers, Inc., is obligated to pay its creditors $6,100 during the year. a. What is the market value of the shareholders equity if assets have a market value of $6,700? b....
Marginal versus Average Tax Rates (Corporation Growth has $82,000 in taxable income, and Corporation Income has $8.200,000 in taxable income. a. What is the tax bill for each firm? b. Suppose both...
1,600 Balance Sheet The following is a list (in random order) of KIP International Products Company's December 31, 2019, balance sheet accounts: Additional Paid-In Capital on Preferred Stock $2,000...
Question 3 4 pts 9 x + 3 x 9 if x 0 Find a) lim f(x), b) lim, f(x), C), lim , f(x) if they exist. 3 Edit View Insert Format Tools Table : 12pt M Paragraph B IV A2 Tv
Mr. Geoffrey Guo had a variety of transactions during the 2019 year. Determine the total taxable capital gains included in Mr. Guo's division B income. The transactions included: 1. On January 1,...

A stock has a beta of 1.25, the expected return on the market is 12 percent, and

Question:

Step by Step Answer:

CAPM states the relationship between th...View the full answer

Corporate Finance

Students also viewed these Business questions