Question
3. You are an analyst working for an investment Bank. You are analyzing Easy Jet that has a beta of 1.10 and a required return
3. You are an analyst working for an investment Bank. You are analyzing Easy Jet that has a beta of 1.10 and a required return of 10.2 percent. A. What is the Beta telling you about the sector and the company? (Hint: What is the meaning of a beta above one.) B. If the analysis follows the CAPM and the risk-free rate of return is 1.4 percent, what is the market risk premium and the market expected return for the UK market? Can equity risk premium change? C. The current price is 918 GBp and the average analyst target price is 1,036.61 in one year. What is the expected return? Will the expected return be above or below the SML? What will be your recommendation?
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