Question
Suppose that the Treasury bill rate is 6% rather than 2%. Assume the expected return on the market stays at 9%. Use the following information.
Suppose that the Treasury bill rate is 6% rather than 2%. Assume the expected return on the market stays at 9%. Use the following information.
Stock | Beta () |
United States Steel | 3.09 |
Amazon | 1.35 |
Southwest Airlines | 1.23 |
The Travelers Companies | 1.18 |
Tesla | 0.98 |
ExxonMobil | 0.92 |
Johnson & Johnson | 0.93 |
Coca-Cola | 0.58 |
Consolidated Edison | 0.15 |
Newmont | 0.10 |
a. Calculate the expected return from Johnson & Johnson. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
b. Find the highest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
c. Find the lowest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
d. Would U.S. Steel offer a higher or lower expected return if the interest rate were 6% rather than 2%? Assume that the expected market return stays at 9%.
e. Would Coca-Cola offer a higher or lower expected return if the interest rate were 8%?
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