A stock has a required return of 16.00%, the risk-free rate is 8.20%, and the market...

A stock has a required return of 16.00%, the risk-free rate is 8.20%, and the market risk premium is 12.20%.
a) What is the stock's beta?
b) If the market risk premium changes to 5.50%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged.

Expert Solution

a) Required return = Risk-free rate + Beta(Market risk premium)

0.1600 = 0.0820 + Beta(0.1220)

Beta = (0.1600 - 0.0820) / 0.1220

Beta = 0.64

b) Required return = Risk-free rate + Beta(Market risk premium)

Required return = 0.0820 + 0.64(0.0550)

Required return = 0.1172 or 11.72%

jeff jeffy answered 2 years ago

A stock has a required return of 12%; the risk-free rate is 4%; and the market...

A stock has a required return of 12%; the risk-free rate is 4%; and the market risk premium is 5%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than...

A stock has a required return of 13%, the risk-free rate is 6%, and the market...

A stock has a required return of 13%, the risk-free rate is 6%, and the market risk premium is 4%. What is the stock's beta? Round your answer to two decimal places. New stock's required rate of return will be

A stock has a required return of 12%, the risk-free rate is 5.5%, and the market...

A stock has a required return of 12%, the risk-free rate is 5.5%, and the market risk premium is 3%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. If the stock's beta is equal to 1.0,...

A stock has a required return of 12%, the risk-free rate is 6.5%, and the market...

A stock has a required return of 12%, the risk-free rate is 6.5%, and the market risk premium is 2%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 3%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. If the stock's beta is greater than 1.0,...

A stock has a required return of 8%, the risk-free rate is 3%, and the market...

A stock has a required return of 8%, the risk-free rate is 3%, and the market risk premium is 3%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 8%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. If the stock's beta is less than 1.0,...

Beta and required rate of return A stock has a required return of 12%; the risk-free...

Beta and required rate of return A stock has a required return of 12%; the risk-free rate is 2.5%; and the market risk premium is 3%. What is the stock's beta? Round your answer to two decimal places. B. If the market risk premium increased to 9%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. 1. If the stock's beta is equal to 1.0, then the change in...

Risk free rate of return is 5% & required rate of return on the market is...

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?

If the risk free rate of return is 7%, the required return on the market is...

If the risk free rate of return is 7%, the required return on the market is 10%, and the required rate of return on Stock J is 13%, what is Stock J’s beta coefficient? a. 1.0 b. 1.5 c. 2.0 d. 2.5 e. 3.0

The risk free rate on a stock is 3%, the required rate in the market is...

The risk free rate on a stock is 3%, the required rate in the market is 7%, and the beta is 1.6. This is the original position. Calculate the required rate of return, r. 2 points, show work Based on the above, now assume that inflation is expected to increase by 2%. Calculate the required rate of return. 2 points, show work What happens to the SML? Circle one: 1 point Shifts Up or Shifts Down or Pivots Up or...

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?

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?

Question