Question

- A stock has a beta of 0.79, the expected return on the market is 11%, and the risk-free rate is 1.5%. Calculate the expected return on the stock. (Enter percentages as decimals and round to 4 decimals)
- A stock has an expected return of 20%, the risk-free rate is 1.5%, and the market risk premium is 8%. Calculate the beta of this stock. (Round to 3 decimals)
- A stock has an expected return of 10%, its beta is 0.59, and the risk-free rate is 1.5%. Calculate the expected return on the market. (Enter percentages as decimals and round to 4 decimals)

Answer #1

**a. The expected return is computed as shown
below:**

**= risk free rate + Beta ( return on market - risk free
rate)**

= 0.015 + 0.79 ( 0.11 - 0.015)

**= 0.0901 Approximately**

**b. The beta is computed as follows:**

**return on stock = risk free rate + Beta x market risk
premium**

0.20 = 0.015 + beta x 0.08

**Beta = 2.313 Approximately**

**c.** **The expected return on market is
computed as follows:**

**return on stock = risk free rate + Beta x (return on
market - risk free rate)**

0.10 = 0.015 + 0.59 ( return on market - 0.015)

**return on market = 0.1591 Approximately**

The expected return on the market portfolio equals 10%, the beta
for Stock K equals 1.10, and the expected return on the stock
equals 10.6875%. Calculate the risk free rate. (Enter percentages
as decimals and round to 4 decimals)

A stock has a beta of 1.5, the expected return on the market is
11 percent, and the risk-free rate is 7.15 percent. The expected
return on this stock must be_________ percent. (Do not
include the percent sign (%). Round your answer to 2 decimal
places. (e.g., 32.16))

A). A stock has a beta of 1.02, the expected return on the
market is 0.09, and the risk-free rate is 0.05. What must the
expected return on this stock be? Enter the answer with 4 decimals
(e.g. 0.1234).
B).
You own a portfolio that has $4100 invested in Stock A and $4900
invested in Stock B. If the expected returns on these stocks are
0.18 and 0.01, respectively, what is the expected return on the
portfolio?
Enter the answer...

A stock has a beta of 1.8. The risk-free rate is 2%. Assume that
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A: What is the expected return for the stock if the expected
return on the market is 11%? 3+ Decimals
B: What is the expected return for the stock if the expected
market risk premium is 11%? 3+ Decimals

1. The risk-free rate is 2.3% and the market risk premium is
5.5%. A stock has a beta of 1.3, what is its expected return of the
stock? (Enter your answers as a percentage. For example, enter
8.43% instead of 0.0843.)
2. Calculate the expected return on a stock with a beta of 1.59.
The risk-free rate of return is 4% and the market portfolio has an
expected return of 10%. (Enter your answer as a percentage. For
example, enter...

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a. A stock has a required return of 11%; the risk-free rate is
5%; and the market risk premium is 5%. What is the stock's beta?
Round your answer to two decimal places.
b. If the market risk premium increased to 10%, 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 less than 1.0, then the change in...

Problem 8-5
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A stock has a required return of 11%; the risk-free rate is
6.5%; and the market risk premium is 4%.
What is the stock's beta? Round your answer to two decimal
places.
If the market risk premium increased to 9%, 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 equal to 1.0, then the change in...

A stock has a beta of 0.7 and an expected return of 11.1
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risk premium? (Do not round intermediate calculations. Enter your
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Stock Y has a beta of 1.5 and an expected return of 14.2
percent. Stock Z has a beta of 0.85 and an expected return of 10.7
percent.
Required:
If the risk-free rate is 4.6 percent and the market risk premium
is 7.1 percent, are these stocks correctly priced?
Stock Y
undervalued or overvalued?
Stock Z
undervalued or overvalued?

Beta and required rate of return
A stock has a required return of 11%; the risk-free rate is 7%;
and the market risk premium is 3%.
What is the stock's beta? Round your answer to two decimal
places.
If the market risk premium increased to 9%, 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
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