Monroe McIntyre has estimated the expected return for Bruehl Industries to be 11.45%. He notes the...

Monroe McIntyre has estimated the expected return for Bruehl Industries to be 11.45%. He notes the risk-free rate is 1.80% and the return of the market is 9.45%. Based on this information, he estimates Bruehl's beta to be:

Solutions

Expert Solution

As per CAPM,

Expected return=risk fee rate+(market return-risk free rate)*beta

or, 11.45=1.80+(9.45-1.80)*beta

or, 11.45-1.80=7.65 * beta

or, 9.65/7.65=beta

or, beta=1.2614

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The stock of United Industries has a beta a 1.14 and an expected return of 11.2....

The stock of United Industries has a beta a 1.14 and an expected return of 11.2. The risk-free rate of return is 4 percent. What is the expected return on the market?

A stock has an expected return of 0.08, its beta is 1.5, and the expected return...

A stock has an expected return of 0.08, its beta is 1.5, and the expected return on the market is 0.1. What must the risk-free rate be? (Hint: Use CAPM) Enter the answer in 4 decimals e.g. 0.0123.

A stock has an expected return of 0.13, its beta is 1.44, and the expected return...

A stock has an expected return of 0.13, its beta is 1.44, and the expected return on the market is 0.09. What must the risk-free rate be? (Hint: Use CAPM) Enter the answer in 4 decimals e.g. 0.0123. You own a portfolio equally invested in a risk-free asset and two stocks (If one of the stocks has a beta of 1 and the total portfolio is equally as risky as the market, what must the beta be for the other...

Stock X has an expected return of 11% and the standard deviation of the expected return...

Stock X has an expected return of 11% and the standard deviation of the expected return is 12%. Stock Z has an expected return of 9% and the standard deviation of the expected return is 18%. The correlation between the returns of the two stocks is +0.2. These are the only two stocks in a hypothetical world. A.What is the expected return and the standard deviation of a portfolio consisting of 90% Stock X and 10% Stock Z? Will any...

The beta for Cowboy Industries, Inc. is 0.8. The expected return on the market portfolio is...

The beta for Cowboy Industries, Inc. is 0.8. The expected return on the market portfolio is 12.0% and the risk-free rate is 2.0%. If the CAPM/SML is correct, what is Cowboy Manufacturing’s required (expected) return?

Question 26 Your firm has an expected stock return of 10%, an expected return on its...

Question 26 Your firm has an expected stock return of 10%, an expected return on its preferred stock of 4%, and the yield on its bonds of 2%. The market value of common stock outstanding is $20 million, preferred stock is $2 million, and the market value of the firm's bonds is $3 million. The tax rate is 25%. What is the WACC? Question 27 A share of preferred stock with an annual dividend of $5 has an expected return...

Question