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Suppose the yield on short term government secunties (percelved to be risk-free) is about 5% Suppose also that the expected return required by the market
Suppose the yield on short term government secunties (percelved to be risk-free) is about 5% Suppose also that the expected return required by the market for a portiolio with a beta of 1.0 is 11.0%. According to the capital asset pricing model: Required: a. What is the expected return on the market portiolio? (Round your answer to 1 decimal place.) b. What would be the expected return on a zero-beta sloch? Suppose you consider buying a share of stock at a price of $80. The stock is expected to pay a dividend of $10 next year and to sell then for $83. The stock risk has been evaluated at =0.5. c-1. Using the SML, calculate the fair rate of return for a stock with a =0.5 (Round your answer to 1 decimal place.) c-2. Calculate the expected rate of return, using the expected price and dividend for next year. (Round your answer to 2 decimal places.)
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