Suppose that the Treasury bill rate is 8% rather than 4%, as we assumed in Table 12.1, and the expected return on the market is 12%. Use the betas in that table to answer the following questions.

a. Calculate the expected return from Pfizer. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

b. What is the highest expected return offered by one of these stocks? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

c. What is the lowest expected return offered by one of these stocks? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

d. Would Ford offer a higher or lower expected return if the interest rate is 8% rather than 4%?

• Lower

• Higher

e. Would Walmart offer a higher or lower expected return if the interest rate is 8% rather than 4%?

• Lower

• Higher

TABLE 12.1 Betas for selected common stocks, January 2011-December 2015 Beta 1.85 1.42 1.31 1.20 1.19 U.S. Steel Disney Ford General Electric Monsanto Boeing Union Pacific Alphabet ExxonMobil Amazon Intel Pfizer Starbucks 1.01 1.00 0.96 0.94 0.93 0.91 0.90 0.79 0.59 0.51 0.49 0.47 0.26 0.24 IBM McDonald's Coca-Cola Campbell Soup Walmart Newmont Mining PG&E 0.23 Note: Betas are calculated from 5 years of monthly data