Question

The risk-free rate of return is 4 percent, and the expected
return on the market is 7.1 percent. Stock A has a beta coefficient
of 1.4, an earnings and dividend growth rate of 6 percent, and a
current dividend of $1.50 a share. Do not round intermediate
calculations. Round your answers to the nearest cent.

What should be the market price of the stock?

$

If the current market price of the stock is $45.00, what
should you do?

The stock be purchased.

If the expected return on the market rises to 13.8 percent and
the other variables remain constant, what will be the value of the
stock?

$

If the risk-free return rises to 5 percent and the return on
the market rises to 14 percent, what will be the value of the
stock?

$

If the beta coefficient falls to 1.3 and the other variables
remain constant, what will be the value of the stock?

$

Explain why the stock’s value changes in c through e.

The increase in the return on the market the required return
and the value of the stock.

The increase in the risk-free rate and the simultaneous
increase in the return on the market cause the value of the stock
to .

The decrease in the beta coefficient causes the firm to become
risky as measured by beta, which the value of the stock.

Answer #1

The risk-free rate of return is 2 percent, and the expected
return on the market is 7.8 percent. Stock A has a beta coefficient
of 1.7, an earnings and dividend growth rate of 7 percent, and a
current dividend of $3.00 a share. Do not round intermediate
calculations. Round your answers to the nearest cent.
If the beta coefficient falls to 1.4 and the other variables
remain constant, what will be the value of the stock?
$___________
Explain why the...

eBook
Problem 11-06
The risk-free rate of return is 1 percent, and the expected
return on the market is 9 percent. Stock A has a beta coefficient
of 1.5, an earnings and dividend growth rate of 3 percent, and a
current dividend of $2.80 a share. Do not round intermediate
calculations. Round your answers to the nearest cent.
$
The stock -Select-shouldshould notItem 2 be purchased.
$
$
$
The increase in the return on the market
-Select-increasesdecreasesItem 6 the...

The risk-free rate of return is 5%, the expected return of the
market index is 10%, and the expected return of Stock Y is 12%.
Based on this information, what is Stock Y’s beta coefficient?
If Stock Y’s beta coefficient is 2.0, what is the stock’s (new)
required rate of return?
Please show the detailed calculation process.

Stock X’s beta is 1.8, the nominal
risk-free rate is 2.4 percent, and the expected rate of return on
an average stock is 12 percent. The current price for Stock X is
$8. The dividend that was just paid was $0.80, and the stock’s
expected constant growth rate is 8 percent. Should Larson buy this
stock? (Calculate the equilibrium value of the stock and decide
if it’s worth $8.)

1. Assume the expected return on the market is 5 percent
and the risk-free rate is 4 percent.
- What is the expected return for a stock with a beta equal to
1.00? (Round answers to 2 decimal places, e.g.
15.25.)
Expected return
2. Assume the expected return on the market is 8 percent
and the risk-free rate is 4 percent.
- What is the expected return for a stock with a beta equal to
1.50? (Round answers to 2...

() The risk-free rate and the expected market rate of return
are 0.056 and 0.125, respectively. According to the capital asset
pricing model (CAPM), what is the expected rate of return on a
security with a beta of 1.25?
(s) Consider the CAPM. The risk-free rate is 5%, and the
expected return on the market is 15%. What is the beta on a stock
with an expected return of 17%?
(A coupon bond pays annual interest, has a par value...

The market price of a security is $60. Its expected rate of
return is 10%. The risk-free rate is 6%, and the market risk
premium is 8%. What will the market price of the security be if its
beta doubles (and all other variables remain unchanged)? Assume the
stock is expected to pay a constant dividend in perpetuity. (Round
your answer to 2 decimal places.) Market price $

2) A stock has an expected return of 10.2 percent, the risk-free
rate is 3.9 percent, and the expected return on the market is 11.10
percent.
What must the beta of this stock be? (5 points)
Is it more or less risky than average? (5 points)
Explain what is that the beta coefficient measures. (5
points)
3) A company currently has a cost of equity of 17.8 percent. The
market risk premium is 10.2 percent and the risk-free rate is...

A stock has expected return of 12.0 percent, the risk free rate
is 3.00 percent, and the market risk premium 4.00.
What must be the stock beta?
What is the equity risk premium for the stock?
What is the return on market portfolio?
Draw the Security Market line: show the risk free rate, return
on the stock and return on the market portfolio

The expected return on Bevo stock is 13.8 percent. If the
expected return on the market is 11 percent and the beta for Bevo
is 1.5, then what is the risk-free rate?
A) 4.80% B) 5.40% C) 6.70% D) 7.50%

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