Question
In: Finance
The risk-free rate is 4%. The expected market rate of return is 11%. If you expect...
The risk-free rate is 4%. The expected market rate of return is 11%. If you expect CAT with a beta of 1.0 to offer a rate of return of 11%, you should:
buy CAT because it is overpriced
sell short CAT because it is overpriced
sell stock short CAT because it is underpriced
buy CAT because it is underpriced
hold CAT because it is fairly priced
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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Multiple Choice
0.25%
0.38%
0.18%...
Assume the risk-free rate is 4% (rf = 4%), the expected return on the market portfolio...
Assume the risk-free rate is 4% (rf = 4%), the expected return
on the market portfolio is 12% (E[rM] = 12%) and the standard
deviation of the return on the market portfolio is 16% (σM = 16%).
(All numbers are annual.) Assume the CAPM holds. *PLEASE HELP WITH
E-H; INCLUDED ADDITIONAL QUESTIONS FOR REFERENCE*
1a. What are the expected returns on securities with the
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1. Consider the CAPM. The risk-free rate is 4%, and the expected return on the market...
1. Consider the CAPM. The risk-free rate is 4%, and the expected
return on the market is 18%. What is the expected return on a stock
with a beta of 1.2?
A.
6%
B.
15.6%
C.
18%
D.
20.8%
2. The CAL provided by combinations of 1-month T-bills and a
broad index of common stocks (i.e. market portfolio) is called the
______.
A.
SML
B.
CAPM
C.
CML
D.
total return line
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a. What is the...
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