Question

9.

A. If the market premium is 9.65 percent, the risk-free rate is 3.88 percent, the inflation rate is 2.63 percent, and Middlefield Motors common stock has a beta of 0.58, then what is the expected return for Middlefield Motors stock? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

B. If the expected return on the market is 14.36 percent, inflation is 2.74 percent, the market premium is 10.84 percent, and Oxygen Optimization common stock has a beta of 1.34, then what is the expected return for Oxygen Optimization stock? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

C

What is the risk premium for Litchfield Design stock if the stock has a beta of 1.59, the expected return on the market is 10.32 percent, the risk-free rate is 5.93 percent, and inflation is 3.17 percent? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Answer #1

9A) **Expected return for Middlefield Motors stock =
9.477% or 0.09477**

As per CAPM, Expected Return = Risk free Rate + (Beta x Market Risk Premium)

Expected Return =3.88 % + (0.58 x 9.65%) =9.477%

**9B) Expected return for Oxygen Optimization stock =
18.0456% or 0.180456**

As per CAPM, Expected Return = Risk free Rate + (Beta x Market Risk Premium)

Expected Return = 3.52% + (1.34x 10.84%) =18.0456%

Market Risk Premium = Market Rate - Risk free Rate

10.84% = 14.36% - Risk free Rate

Risk free Rate = 3.52%

**9C) Risk premium for Litchfield Design stock = 4.39% or
0.439**

Market Risk Premium = Market Rate - Risk free Rate

Market Risk Premium = 10.32% - 5.93% = 4.39%

**Thumbs up Please! Thank You**

The
risk-free return is 4.77 percent, the expected return on the market
is 13.25 percent, the expected real return for Litchfield Design
stock is 1.04 percent, and the beta for Litchfield Design stock is
1.22. What is the inflation rate expected to be? Answer as a rate
in decimal format so that 12.34% would be entered as .1234 and
0.98% would be entered as .0098

What is the expected return of a portfolio with two stocks that
has 3,900 shares of stock A, which has a price of 30.8 dollars per
share and an expected return of 7.98 percent, and 87,800 dollars of
stock B, which has a beta of 1.53? The market has an expected
return of 13.54 percent, the inflation rate is 1.59 percent, and
the risk-free rate is 4 percent. Answer as a rate in decimal format
so that 12.34% would be...

What is the expected return of a portfolio with two stocks
that has 2,800 shares of stock A, which has a price of 20.9 dollars
per share and an expected return of 5.88 percent, and 69,700
dollars of stock B, which has a beta of 1.79? The market has an
expected return of 15.29 percent, the inflation rate is 1.02
percent, and the risk-free rate is 5.18 percent. Answer as a rate
in decimal format so that 12.34% would be...

What is the expected return of a portfolio with two stocks
that has 3,200 shares of stock A, which has a price of 25.1 dollars
per share and an expected return of 5.97 percent, and 75,300
dollars of stock B, which has a beta of 1.13? The market has an
expected return of 13.51 percent, the inflation rate is 2.1
percent, and the risk-free rate is 3.01 percent. Answer as a rate
in decimal format so that 12.34% would be...

What is the expected return of a portfolio with two stocks that
has 2,300 shares of stock A, which has a price of 38.2 dollars per
share and an expected return of 5.21 percent, and 86,200 dollars of
stock B, which has a beta of 1.63? The market has an expected
return of 12.39 percent, the inflation rate is 1.81 percent, and
the risk-free rate is 4.74 percent. Answer as a rate in decimal
format so that 12.34% would be...

The expected return on the market is 16.52 percent, the
risk-free rate is 5.37 percent, and the tax rate is 45 percent.
Fairfax Paint has 1,200,000 common shares outstanding that are
priced at 20 dollars per share and have an expected return of 18.96
percent and an expected real return of 17.16 percent. Last year,
Fairfax Paint common stock had a return of 20.47 percent. The
company also has 800,000 shares of preferred stock outstanding that
are priced at 15...

The expected return on the market is 14.89 percent, the
risk-free rate is 5.45 percent, and the tax rate is 20
percent. Fairfax Paint has 1,000,000 common shares
outstanding that are priced at 25 dollars per share and have an
expected return of 15.24 percent and an expected real return of
13.09 percent. Last year, Fairfax Paint common stock had a return
of 16.77 percent. The company also has 400,000 shares of preferred
stock outstanding that are priced at 15 dollars...

The expected return on the market is 13.96 percent, the
risk-free rate is 3.66 percent, and the tax rate is 35
percent. Fairfax Paint has 1,400,000 common shares
outstanding that are priced at 30 dollars per share and have an
expected return of 15.15 percent and an expected real return of
13.44 percent. Last year, Fairfax Paint common stock had a return
of 17.02 percent. The company also has 600,000 shares of preferred
stock outstanding that are priced at 15 dollars...

You own a portfolio that has 5,000 shares of stock A, which is
priced at 13 dollars per share and has an expected return of 12.5
percent, and 2,700 shares of stock B, which is priced at 22.1
dollars per share and has an expected return of 7.05 percent. The
risk-free return is 3.91 percent and inflation is expected to be
1.27 percent. What is the risk premium for your portfolio? Answer
as a rate in decimal format so that...

You own a portfolio that has 6,000 shares of stock A, which is
priced at 15.5 dollars per share and has an expected return of
15.37 percent, and 2,000 shares of stock B, which is priced at 20.5
dollars per share and has an expected return of 6.84 percent. The
risk-free return is 2.71 percent and inflation is expected to be
1.97 percent. What is the risk premium for your portfolio? Answer
as a rate in decimal format so that...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 11 minutes ago

asked 36 minutes ago

asked 44 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago