Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer questions 7-9 please and thank you :) QUESTION 7 The expected return on a stock with a beta of 0.8 is 11%. If

Please answer questions 7-9 please and thank you :)

QUESTION 7 The expected return on a stock with a beta of 0.8 is 11%. If the risk-free rate is 4.5%, what is the market risk premium?

A. 11% B. 7.5% C. 9.28% D. 8.13%

QUESTION 8 A stock has a beta of 1.1 and an expected return of 12%. The risk-free asset currently earns 4%. If a portfolio of the two assets has a beta of 1.65 what is the weight of the stock in the portfolio and expected return of the portfolio?

A. 125%, 14% B. 0%, 4% C. 150%, 16% D. 100%, 12%

QUESTION 9 The expected return for ABC inc. and XYZ inc. according to equity analysts is 13.75% and 10.5%. If the betas for the two stocks is 1.2 and 0.9 respectively, and the return on the market is 11.5 %. Are the stocks over, under, or fairly valued?

A. ABC: fair valued, XYZ: fair valued

B. ABC: Overvalued, XYZ: Overvalued

C. ABC: Undervalued, XYZ: undervalued

D. ABC: Undervalued, XYZ: Overvalued

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

Real Estate Finance Theory And Practice

Authors: Terrence M. Clauretie, G. Stacy Sirmans

4th Edition

032414377X, 978-0324143775

More Books

Students also viewed these Finance questions

Question

. How should inventory be measured in accordance with IAS 2?

Answered: 1 week ago

Question

mple 10. Determine d dx S 0 t dt.

Answered: 1 week ago