The beta coefficient for security-DTX is 1.70. If the market risk premium is 11.36% and the...

The beta coefficient for security-DTX is 1.70. If the market risk premium is 11.36% and the government bond yields 8.00%, find the expected return from the security-DTX using the CAPM.

[Round the final answer to two decimal places. If your answer is 12.34%, write only 12.34.]

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The risk premium for an individual security is computed by: multiplying the security's beta by the...

The risk premium for an individual security is computed by: multiplying the security's beta by the risk-free rate of return. multiplying the security's beta by the market risk premium. adding the risk-free rate to the security's expected return. dividing the market risk premium by the beta of the security. dividing the market risk premium by the quantity (1 + Beta).

If the market risk premium is 2%, the risk-free rate is 4.4% and the beta of...

If the market risk premium is 2%, the risk-free rate is 4.4% and the beta of a stock is 1.2, what is the expected return of the stock?

A stock's beta is 5, the market risk premium is 6%, and the risk-free rate...

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...

Important : Draw the Security Market Line and label the axes. Include the market risk premium...

Important : Draw the Security Market Line and label the axes. Include the market risk premium in your diagram. Also include an underpriced asset Please draw the diagram and label it properly

18. Graph and Draw (Basic) the security market line if the market-risk premium is 5% and...

18. Graph and Draw (Basic) the security market line if the market-risk premium is 5% and the risk-free rate is 7%. a) Suppose that an asset has a beta of -1 and an expected return of 4%. Plot it on the graph you drew. Is the security properly priced? If not, explain what will happen in this market. b) Suppose that an asset has a beta of 3 and an expected return of 20%. Plot it on the graph you...

Vanessa Inc has a beta of .7. The market risk premium is 8% and risk-free rate...

Vanessa Inc has a beta of .7. The market risk premium is 8% and risk-free rate is 5%. Vanessa Inc’s last dividend was $1.20 per share, and the dividend is expected to grow at 7% indefinitely. The stock price is currently $40. Vanessa Inc’s target capital structure is 30% debt and 70% equity. It cost of debt is 10% before taxes. The tax rate is 40%. a) Calculate the cost of equity under: The dividend growth CAPM Average of the...

A company has unleveraged beta of 1.7, risk free rate 7% and market risk premium for...

A company has unleveraged beta of 1.7, risk free rate 7% and market risk premium for 5%. The applicable tax rate is 40%. The company needs to finance its new project having three different scenarios of financing: Scenario Debt ratio Interest rate (before tax) EPS 1 0% 0% $2.7 2 20% 12% $3.8 3 80% 17% $4.2 2) If the company is unleveraged, its Price per share is * $11.75 $22.41 $17.42 None of the above 3) If the company...

Stock M has a beta of 1.2. The market risk premium is 7.8 percent and the...

Stock M has a beta of 1.2. The market risk premium is 7.8 percent and the risk-free rate is 3.6 percent. Assume you compile a portfolio equally invested in Stock M, Stock N, and a risk-free security that has a portfolio beta equal to the overall market. What is the expected return on the portfolio? a.) 11.2% b.) 10.8% c.) 10.4% d.) 11.4% e.) 11.7%

2. A stock has a beta of 1.35, the market risk premium is 6 percent, and...

2. A stock has a beta of 1.35, the market risk premium is 6 percent, and the risk-free rate is 3.5 percent. What is the required rate of return on this stock? Group of answer choices a. 3.50% b. 6.87% c. 11.60% d. 13.13%

Suppose a firm has a beta of 1.5.The market risk premium is expected to be 8%,...

Suppose a firm has a beta of 1.5.The market risk premium is expected to be 8%, and the current risk-free rate is 2%. Suppose a firm has a beta of 1.5.The market risk premium is expected to be 8%, and the current risk-free rate is 2%. The firm maintains a constant growing dividend policy that grows at 5% per year ; the most recent dividend was $1.8. Currently stock price is $21. Multiple Choice To find cost of equity using...

Subjects