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In: Finance
Assignment No. 4:- Assume that the real interest rate is 2.0%; Expected Inflation is 3.0%; Beta...
Assignment No. 4:- Assume that the real interest rate is 2.0%; Expected Inflation is 3.0%; Beta is 1.30; Required Return on the Market is 10.0%. Use CAPM to calculate:- 1- The risk-free rate. 2 - The market risk-premium. 3 - The Expected or Required rate of return. 4 - If Expected Inflation is 4.0%; The Expected rate of return becomes?? 5 - If the Required Return on the Market is 12.0%; The Expected rate of return becomes??
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Assume that you have the following information:- Market Info:- Real interest rate = 2.0%; Expected inflation...
Assume that you have the following information:- Market Info:-
Real interest rate = 2.0%; Expected inflation = 4.0%; Rm = 12.0%;
Tax = 30.0%. Com. Stock info:- Par value = $1.0 ; Market value
(price) = ?? ; Beta = 1.60 ; No. of outstanding shares =
1,000,000.0 ; EPS $3.0 ; pay-out ratio = 30.0%; Growth in EPS &
Dividends = 5.0% ; Preferred Stock info:- Par value = $100.0;
Dividend per share = 10.0%; Rp=8.0%; No. of outstanding...
Assume that you have the following information:- Market Info:- Real interest rate = 2.0%; Expected inflation...
Assume that you have the following information:-
Market Info:- Real interest rate = 2.0%; Expected inflation =
4.0%; Rm = 12.0%; Tax = 30.0%.
Com. Stock info:- Par value = $1.0 ; Market value (price) = ?? ;
Beta = 1.60 ; No. of outstanding shares = 1,000,000.0 ; EPS $3.0 ;
pay-out ratio = 30.0%;
Growth in EPS & Dividends = 5.0% ;
Preferred Stock info:- Par value = $100.0; Dividend per share =
10.0%; Rp=8.0%; No. of outstanding...
Assume that you have the following information:- Market Info:- Real interest rate = 2.0%; Expected inflation...
Assume that you have the following information:-
Market Info:- Real interest rate = 2.0%; Expected inflation =
4.0%; Rm = 12.0%; Tax = 30.0%.
Com. Stock info:- Par value = $1.0 ; Market value (price) = ?? ;
Beta = 1.60 ; No. of outstanding shares = 1,000,000.0 ; EPS $3.0 ;
pay-out ratio = 30.0%;
Growth in EPS & Dividends = 5.0% ;
Preferred Stock info:- Par value = $100.0; Dividend per share =
10.0%; Rp=8.0%; No. of outstanding...
A. The real risk-free rate is 2.0% and inflation is expected to be 3.25% for the...
A. The real risk-free rate is 2.0% and inflation is expected to
be 3.25% for the next 2 years. A 2-year Treasury security yields
6.05%. What is the maturity risk premium for the 2-year security?
Round your answer to one decimal place.
%
B. An analyst is evaluating securities in a developing nation
where the inflation rate is very high. As a result, the analyst has
been warned not to ignore the cross-product between the real rate
and inflation. A...
you have the following information:- Market Info:- Real interest rate = 2.0%; Expected inflation = 4.0%;...
you have the following information:-
Market Info:- Real interest rate = 2.0%; Expected inflation =
4.0%; Rm = 12.0%; Tax = 30.0%.
Com. Stock info:- Par value = $1.0 ; Market value (price) = ?? ;
Beta = 1.60 ; No. of outstanding shares = 1,000,000.0 ; EPS $3.0 ;
pay-out ratio = 30.0%;
Growth in EPS & Dividends = 5.0% ;
Preferred Stock info:- Par value = $100.0; Dividend per share =
10.0%; Rp=8.0%; No. of outstanding shares =...
If the real rate of interest is 2.1% and the expected inflation rate is 3.4%, then...
If the real rate of interest is 2.1% and the expected
inflation rate is 3.4%, then what would be nominal interest
rate?
Select one:
a. 5%
b. 6%
c. 5.57%
2. a. If the real interest rate is 5% and the (expected) inflation rate is 0%,...
2. a. If the real interest rate is 5% and the (expected)
inflation rate is 0%, what will be the price of a risk
free bond that matures in one year with a face value of
$500?
b. If the (expected inflation rate increases to 2%, what will
the price of this bond be?
c. Show this change (from a to b) in a graph of the bond
market with the quantity of bonds
on the horizontal axis and the...
5. If the annual real rate of interest is 5% and the expected inflation rate is...
5. If the annual real rate of interest is 5% and the expected
inflation rate is 4%, the nominal rate of interest would be
approximately
A. 1%.
B. 9%.
C. 20%. D. 15%. E. 7%.
6. If the annual real rate of interest is 2.5% and the
expected inflation rate is 3.7%, the nominal rate of interest would
be approximately
A. 3.7%.
Page | 2
B. 6.2%. C. 2.5%. D. −1.2%. E. 4.3%.
7. You purchased a share of stock...
Problem 4-18 Determinants of Interest Rates The real risk-free rate is 4%. Inflation is expected to...
Problem 4-18
Determinants of Interest Rates
The real risk-free rate is 4%. Inflation is expected to be 2%
this year, 3% next year, and then 5.5% thereafter. The maturity
risk premium is estimated to be 0.0007 x (t - 1), where t = number
of years to maturity. What is the nominal interest rate on a 7-year
Treasury security? Round your answer to two decimal places.
_____%
EXPECTED INTEREST RATE The real risk-free rate is 2.55%. Inflation is expected to be 2.75% this...
EXPECTED INTEREST RATE
The real risk-free rate is 2.55%. Inflation is expected to be
2.75% this year, 4.25% next year, and 3.15% thereafter. The
maturity risk premium is estimated to be 0.05 × (t - 1)%, where
t = number of years to maturity. What is the yield on a
7-year Treasury note? Do not round your intermediate calculations.
Round your answer to two decimal places.
%
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