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

Solutions

Expert Solution

Ans c. 2.0

Required Return =	Risk free Return + (Market Return - Risk free return)* Beta
13% =	7% + (10% - 7%) * Beta
13% - 7% =	3% * Beta
Beta =	6% / 3%
Beta =	2.0

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

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?

Assume that the risk-free rate is 3% and the required return on the market is 9%....

Assume that the risk-free rate is 3% and the required return on the market is 9%. What is the required rate of return on a stock with a beta of 2.2? Round your answer to two decimal places.

Assume that the risk-free rate is 2.5% and the required return on the market is 10%....

Assume that the risk-free rate is 2.5% and the required return on the market is 10%. What is the required rate of return on a stock with a beta of 2.1? Round your answer to two decimal places.

Assume that the risk-free rate is 4.5% and the required return on the market is 8%....

Assume that the risk-free rate is 4.5% and the required return on the market is 8%. What is the required rate of return on a stock with a beta of 2? Round your answer to two decimal places.

The risk free rate is 4%, and the required return on the market is 12%. What...

The risk free rate is 4%, and the required return on the market is 12%. What is the required return on an asset with a beta of 1.5? What is the reward/risk ratio given the required rate of return from (a)? What is the required return on a portfolio consisting of 40% of the asset above and the rest in an asset with an average amount of systematic risk? (hint: asset with an average amount of systematic risk has beta...

Assume that the risk-free rate is 6% and the required return onthe market is 9%....

Assume that the risk-free rate is 6% and the required return on the market is 9%. What is the required rate of return on a stock with a beta of 0.6? Round your answer to two decimal places.

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 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.

3. The risk-free rate is 2%, and the required return on the market is 8%. What...

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...

Subjects