Suppose that the Treasury bill rate is 9% rather than 6%, as we assumed in Table 12.1, and the expected return on the market is 11%. Use the betas in that table to answer the following questions.

a. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

b. Suppose now that you continued to assume that the expected return on the market remained at 11%. Now, what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

 

TABLE 12.1 Betas for Ticker Company Beta selected common stocks, January 2013-December 2017 U.S. Steel 3.01 MRO Marathon Oil 2.39 AMZN Amazon 1.47 DIS Disney 1.39 F Ford 1.26 Boeing 1.24 INTC Intel 1.07 GE GE 1.06 PFE Pfizer 1.02 IBM IBM 0.94 GOOG Alphabet 0.94 UNP Union Pacific 0.90 ExxonMobil 0.82 SBUX Starbucks 0.75 Coca-Cola 0.70 MCD McDonald's 0.68 Campbell Soup 0.40 WMT Walmart 0.37 PCG Pacific Gas & Electric 0.15 NEM Newmont Mining 0.10