Question

10) Stay-Home's stock has the required return of 10% and beta of 1.2. Given that the market return is 9%, using the CAPM, what is the risk-free rate?

-Mama Mia Inc. just paid $5 dividends per share; it was $3.25 seven years ago. Assuming a constant growth rate and 10% required return.

13) How much is their dividend growth rate?

14) What is the current stock price of Mama Mia?

Answer #1

Suppose the required rate of return on a stock with Beta 1.2 is
18 per cent and risk free rate is 6 per cent. According to the
CAPM
a) What is the expected rate of return on the market
portfolio?
b) What is the expected rate of return of a zero-beta
security?
c) Suppose you select Stock ABC for Rs. 50 and the stock is
expected to pay a dividend of rs. 2 next year and is expected to
fetch...

A particular asset has
a beta of 1.2 and an expected return of 10%. The expected return on
the market portfolio is 13% and the risk-free rate is 5%.
The share is:
--
Hint:
Compare Expected Return to Required Return
A. overpriced
B. underpriced
C. appropriately priced
D. There is not enough information to answer the question.
Previous

A stock with a beta of 1.2 just paid a dividend of $3.25 that is
expected to grow at 7%. If the risk-free rate is 2% and the market
risk premium is 5.5%, what should be the price of the stock in five
years?
A. $217.34
B. $284.89
C. $203.13
D. $304.84

Partridge Pllastic's stock has an estimated beta of 1.4, and its
required return is 13%. Cleaver Motors' stock has a beta of 1.2. If
the risk-free rate is 6%, what is the required return on Cleaver
Motors' stock?

Use the required return-beta equation from the CAPM.
1. What is the required return if the risk-free rate is 3%, beta
1.5 and the required return for the market portfolio is 8%?
2. What is the risk-free rate if beta is 1.1, the required
return 8.4% and the required return for the market portfolio is
8%?
3. What is beta if the risk-free rate is 3%, the required return
10% and the required return for the market is 8%?
4....

BETA AND REQUIRED RATE OF RETURN
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...

Stock A has a beta of 1.2 and an expected return of 10%. The
risk-free asset currently earns 4%. If a portfolio of the two
assets has an expected return of 6%, what is the beta of the
portfolio? A) 0.3 B) 0.4 C) 0.5 D) 0.6 E) 0.7

The expected return and betas for three stocks are given
below:
Stock
EXPECTED RETURN (%)
BETA
A
11
1.4
B
9
1.2
C
10
1.7
Market returns, R m, is 8% and risk-free rate is 3%.
Which of the three stocks is undervalued according
to the CAPM?

Consider two stocks, A and B. Stock A has an expected return of
10% and a beta of 1.1. Stock B has an expected return of 16% and a
beta of 1.2. The market degree of risk aversion, A, is 4. The
variance of return on the market portfolio is 0.0175. The risk-free
rate is 5%. Required: (4*2.5 = 10pts) A. What is the expected
return of the market? B. Using the CAPM, calculate the expected
return of stock A....

Required Rate of Return
Stock R has a beta of 1.9, Stock S has a beta of 0.65, the
expected rate of return on an average stock is 12%, and the
risk-free rate is 4%. By how much does the required return on the
riskier stock exceed that on the less risky stock? Round your
answer to two decimal places.
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock...

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