Question
Stock Y has a beta of 1.50 and an expected return of 16%. Stock Z has a beta of 0.70 and an expected return of
Stock Y has a beta of 1.50 and an expected return of 16%. Stock Z has a beta of 0.70 and an expected return of 11.5%. The market risk premium is 8%. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
| a. | 5.29% |
| b. | 6.78% |
| c. | 8.67% |
| d. | 7.56% |
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Fundamental accounting principle
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
21st edition
1259119831, 9781259311703, 978-1259119835, 1259311708, 978-0078025587
