Suppose that the Treasury bill rate is 6% rather than the 2% assumed in earlier examples. Assume that the expected return on the market stays at 9%. Use the betas in Table 8.1.

a. Calculate the expected return from Johnson & Johnson.

b. Find the highest expected return that is offered by one of these stocks.

c. Find the lowest expected return that is offered by one of these stocks.

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 6%?

TABLE 8.1 Estimated betas for selected U.S. stocks, March 2015- February 2020