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iii is important thx Kilbride Engineering's beta has been estimated to be 1.40. The expected rate of return on the market portfolio for the coming
iii is important thx
Kilbride Engineering's beta has been estimated to be 1.40. The expected rate of return on the market portfolio for the coming year is 12 per cent and the risk free rate of return is 5 per cent. The economy grows at a higher rate than anticipated at the start of the year and as a result stock market prices also increase during the course of the year. At the end of the year the return on the market portfolio turns out to be higher than anticipated at 18 per cent. The return on Kilbride Engineering also turns out to be higher than that anticipated at the start of the year at 28 per cent. i) Determine the expected rate of return on the company's shares at the start of the year. (2 marks) ii) Determine the expected return for the company at the end of the year, given the return on the market portfolio, assuming no changes in the risk free rate or the beta for the company. (2 marks) iii) Discuss the main influences on a firm's beta and how the current economic conditions can influence beta. (4 marks)Step by Step Solution
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