Suppose the risk-free rate is 1% and the market’s risk premium is 7%. If a portfolio...

Suppose the risk-free rate is 1% and the market’s risk premium is 7%. If a portfolio has a Beta of 1.2, what rate of return would you expect on this portfolio?

Select one:

a. Cannot tell from the information given

b. 9.6%

c. 8.7%

d. 9.4%

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

1. Suppose the risk-free rate is 2.64% and an analyst assumes a market risk premium of...

1. Suppose the risk-free rate is 2.64% and an analyst assumes a market risk premium of 6.89%. Firm A just paid a dividend of $1.25 per share. The analyst estimates the β of Firm A to be 1.41 and estimates the dividend growth rate to be 4.64% forever. Firm A has 276.00 million shares outstanding. Firm B just paid a dividend of $1.53 per share. The analyst estimates the β of Firm B to be 0.85 and believes that dividends...

1. A) Suppose the risk-free rate is 3.00% and an analyst assumes a market risk premium...

1. A) Suppose the risk-free rate is 3.00% and an analyst assumes a market risk premium of 7.64%. Firm A just paid a dividend of $1.03 per share. The analyst estimates the β of Firm A to be 1.33 and estimates the dividend growth rate to be 4.74% forever. Firm A has 262.00 million shares outstanding. Firm B just paid a dividend of $1.61 per share. The analyst estimates the β of Firm B to be 0.87 and believes that...

1.Suppose the risk-free rate is 3.72% and an analyst assumes a market risk premium of 7.99%....

1.Suppose the risk-free rate is 3.72% and an analyst assumes a market risk premium of 7.99%. Firm A just paid a dividend of $1.11 per share. The analyst estimates the β of Firm A to be 1.47 and estimates the dividend growth rate to be 4.95% forever. Firm A has 269.00 million shares outstanding. Firm B just paid a dividend of $1.98 per share. The analyst estimates the β of Firm B to be 0.84 and believes that dividends will...

1. The risk free rate is 2%, the risk premium for the market is 5%, and...

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%...

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...

Suppose the risk-free rate is 1.24% and an analyst assumes a market risk premium of 6.69%....

Suppose the risk-free rate is 1.24% and an analyst assumes a market risk premium of 6.69%. Firm A just paid a dividend of $1.31 per share. The analyst estimates the β of Firm A to be 1.40 and estimates the dividend growth rate to be 4.85% forever. Firm A has 261.00 million shares outstanding. Firm B just paid a dividend of $1.67 per share. The analyst estimates the β of Firm B to be 0.80 and believes that dividends will...

Suppose the risk-free rate is 1.46% and an analyst assumes a market risk premium of 6.80%....

Suppose the risk-free rate is 1.46% and an analyst assumes a market risk premium of 6.80%. Firm A just paid a dividend of $1.23 per share. The analyst estimates the β of Firm A to be 1.26 and estimates the dividend growth rate to be 4.95% forever. Firm A has 260.00 million shares outstanding. Firm B just paid a dividend of $1.99 per share. The analyst estimates the β of Firm B to be 0.83 and believes that dividends will...

Suppose the risk-free rate is 1.88% and an analyst assumes a market risk premium of 7.11%....

Suppose the risk-free rate is 1.88% and an analyst assumes a market risk premium of 7.11%. Firm A just paid a dividend of $1.45 per share. The analyst estimates the β of Firm A to be 1.21 and estimates the dividend growth rate to be 4.11% forever. Firm A has 277.00 million shares outstanding. Firm B just paid a dividend of $1.62 per share. The analyst estimates the β of Firm B to be 0.87 and believes that dividends will...

Suppose the risk-free rate is 1.88% and an analyst assumes a market risk premium of 7.11%....

Subjects