a). What is the market risk premium if the risk free rate is 5%
and the expected market return is given as follows?
State of nature
Probability
Return
Boom
20%
30%
Average
70%
15%
Recession
10%
5%
b). A firm is evaluating two projects that are mutually
exclusive with initial investments and cash flows as follows:
Project A
Project B
Initial Investment
End-of-Year Cash Flows
Initial Investment
End-of-Year Cash Flows
RM40,000
RM 20,000
RM 90,000
RM 40,000
RM 20,000
RM...
1. The risk free rate is 2%, the risk premium for the market is
5%, and a stock has an expected return of 10.5%. What is the firm’s
beta?
2. A firm has a beta of 1.3 and the risk premium for the market
is 6%. If the firms expected return is 11%, what is the risk free
rate?
3. A firm with a beta of 1.5 has a market return of 15% when the
risk free rate is 3%...
A stock's beta is 5, the market risk premium is 6%, and the
risk-free rate is 2%. According to the CAPM, what discount rate
should you use when valuing the stock?
A stock's beta is 1.5, the expected market return is 6%, and
the risk-free rate is 2%. According to the CAPM, what discount rate
should you use when valuing the stock?
You have 2 assets to choose from when forming a portfolio: the
market portfolio and a risk-free...
Risk free rate of return is 5% & required rate of return on
the market is 9%. What is the security market line? If corporate
beta is 1.8 what does that mean?
Assume that the risk-free rate is 3.5% and the market risk
premium is 3%. What is the required return for the overall stock
market? Round your answer to two decimal places. % What is the
required rate of return on a stock with a beta of 1.9? Round your
answer to two decimal places. %
3. The risk-free rate is 2%, and the required return on the
market is 8%. What is the required return on an asset with a beta
of 1.2? What is the reward/risk ratio? What is the required return
on a portfolio consisting of 80% of the asset with a beta of 1.2
and the rest in an asset with an average amount of systematic
risk?
4. Using the CAPM, show that the ratio of the risk premiums on
the two...
REQUIRED RATE OF RETURN A stock has a beta of
0.75. The risk-free rate is 9%, and the market risk premium is 8%.
What is the stock’s required rate of return?
PRINCIPLE OF
CORPORATE FINANCE
9. The risk-free rate is 5%, the
market risk premium is 8%, and the market return is 13%. Stock Y's
beta is 1.85 and the standard deviation of its returns is 62.5%.
What should be the stock's expected rate of return to make the
investor indifferent toward buying or selling the stock?
a) 11.66%
b) 12.50%
c) 15.54%
d) 19.80%
10. The expected rate
of return of an investment _____.
a) is the median value of...