Stock Y has a beta of 1.2 and an expected return of 11.4%. Stock Z has a

Question:

Stock Y has a beta of 1.2 and an expected return of 11.4%. Stock Z has a beta of .80 and an expected return of 8.06%. If the risk-free rate is 2.5% and the market risk premium is 7.2%, are these stocks correctly priced?

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

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals Of Corporate Finance

ISBN: 9781259654756

10th Canadian Edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts, J. Ari Pandes, Thomas Holloway

See More Books

Question Posted: Nov 18, 2022 01:14 AM

See More Questions

Stock Y has a beta of 1.25 and an expected return of 14 percent. Stock Z has a beta of .70 and an expected return of 9 percent. If the risk-free rate is 6 percent and the market risk premium is 7...
Stock Y has a beta of 1.35 and an expected return of 14.2 percent. Stock Z has a beta of .75 and an expected return of 9.1 percent. If the risk-free rate is 4.3 percent and the market risk premium is...
Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the risk-free rate is 3.2 percent and the market risk premium is...
A square garden has an area of 900 square feet. If a sprinkler (with a circular pattern) is placed in the center of the garden, what is the minimum radius of spray the sprinkler would need in order...
A single observation of a random variable having a geometric distribution is to be used to test the null hypothesis that its parameter equals 0 against the alter-native that it equals 1 > 0. Use the...
Rationalize the numerators in Problem. V3mn
Following the same methodology as Chapter 2, derive the modified FokkerPlanck equation for the evolution of the risk-neutral stock price density, as written in (5.17).
Absco, Inc. is a calendar year- end clothing manufacturer that sells exclusively to retailers. It engages in a large number of contracts with its customers. Below are some specific contract issues...
ABC Company reported the following amounts in the equity section of its December 31, 2021, statement of financial position. Share capitalpreference, 9%, $100 par (10,000 shares authorized, 3,000...
Some people claim that women can experience mother hearing, an increased sensitivity to and awareness of noises, in particular those of children. This special ability is often associated with being a...
Stock in Coalhurst Industries has a beta of 0.95. The market risk premium is 7%, and T-bills are currently yielding 3.6%. The companys most recent dividend was $2.05 per share, and dividends are...
A stock has an expected return of 12.15%, its beta is 1.31, and the expected return on the market is 10.2%. What must the risk-free rate be?
Olbet, Inc., is a nongrowth company in the 35-percent tax bracket. Olbets perpetual EBIT is $$1.2$ million per annum. The firms pretax cost of debt is 8 percent and its interest expense per year is...
The current rate of interest on S-T Treasury Bills = 10%, intermediate term Gov. Bonds = 11%, Lt- Gov. Bonds = 12%, AA rate Corp. Bonds = 13.5% and the rate of inflation is 5%. Holding-period returns...
Prepare Income Statement(absorption costing) for the second, third and fourth month. SALES (SP X unit sold) INCOME STATEMENT FORMAT (ABSORPTION COSTING) XXX Less: Cost of Goodsold VARIABLE COST (VC...
The following shows the distribution of final exam scores in a large introductory psychology class. The proportion under the curve is given for two segments (short answers-no calculations required)....
How much overhead was included in the cost of Job #461 at the beginning of January? * (1 Point). BREAD Co. uses a job order costing system. At the beginning of January, the company had 2 jobs in...
3. (3pt.) A state of a physical system is just a description of the system at an instant in time in terms of its properties. In classical mechanics, states are represented by points (in phase space)....
Suppose that the surface temperature of the Sun were to increase by 3% from the current value, assuming for simplicity that the radius of the Sun stays fixed. By how much would the solar constant on...
What is a make-or-buy decision?
Annuity Period As you increase the length of time involved, what happens to the present value of an annuity? What happens to the future value?
Annuity Period As you increase the length of time involved, what happens to the present value of an annuity? What happens to the future value?
Annuity Period As you increase the length of time involved, what happens to the present value of an annuity? What happens to the future value?
Cash from Operating Activities: ______________ Cash from Investing Activities: ______________ Cash from Financing Activities: ______________ Problem 2: Financial Ratios The GAP Macys 1 Current Ratio...
On January 1, 2021, Winky Enterprises issued 12% bonds dated January 1, 2021, with a face amount of $2,800,000. The bonds mature in 2030 (10 years). For bonds of similar risk and maturity, the market...
Using the following accounts and balances, prepare the stockholders' equity vection of the balance sheet. Pilty thousand shares of common stock are authorised, and 1,000 shares have been recoured,...

Stock Y has a beta of 1.2 and an expected return of 11.4%. Stock Z has a

Question:

Step by Step Answer:

There are two ways to correctly answer this question We will work through both First we can use the ...View the full answer

Fundamentals Of Corporate Finance

Related Video

Students also viewed these Business questions