Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A- A share has a Beta of 0.9. A financial analyst gives it an expectation of yield of 13%. The risk-free rate is 8% and

A- A share has a Beta of 0.9. A financial analyst gives it an expectation of yield of 13%. The risk-free rate is 8% and the risk premium of the market portfolio of 6%. Is the financial analyst optimistic or pessimistic by attributing an expected return of 13% to the share in question? B- The Nofun Ltd share has a Beta of 1 and a very high specific risk. If the expected market return is 20%, the expected return of Nofun Ltd. will be : a- 10% if the risk-free interest rate is 10%; b- 10% if the risk-free interest rate is 10%. b- by 20%. c- more than 20% because of the high specific risk d- undetermined unless the risk-free interest rate is also known. Which answer is correct? Briefly state why.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.

9th Canadian Edition, Volume 2

470964731, 978-0470964736, 978-0470161012

Students also viewed these Finance questions