Question

Assume that the risk-free rate of interest is 5% and the expected rate of return on the market is 17%. I am buying a firm with an expected perpetual cash flow of $2,000 but am unsure of its risk. If I think the beta of the firm is 0.4, when in fact the beta is really 0.8, how much more will I offer for the firm than it is truly worth? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Amount offered in excess=$?

Answer #1

Assume that the risk-free rate of interest is 3% and the
expected rate of return on the market is 15%. I am buying a firm
with an expected perpetual cash flow of $3,000 but am unsure of its
risk. If I think the beta of the firm is 0.6, when in fact the beta
is really 1.2, how much more will I offer for the firm than it is
truly worth?
Amount offered in excess_________.

Assume that the risk-free rate of interest is 3% and the
expected rate of return on the market is 15%. I am buying a firm
with an expected perpetual cash flow of $1,000 but am unsure of its
risk. If I think the beta of the firm is 0.8, when in fact the beta
is really 1.6, how much more will I offer for the firm
than it is truly worth? (Do not round intermediate
calculations. Round your answer to...

Assume that the risk-free rate of interest is 3% and the
expected rate of return on the market is 15%. I am buying a firm
with an expected perpetual cash flow of $1,000 but am unsure of its
risk. If I think the beta of the firm is 0.8, when in fact the beta
is really 1.6, how much more will I offer for the firm
than it is truly worth? (Do not round intermediate
calculations. Round your answer to...

The risk-free rate in a given economy is 5%, and the expected
rate of return on the market is 10%. I am buying a firm with a
perpetual annual cash flow of Rs. 2,000. If I think the beta of the
firm is 0.8, when the beta is in fact 1.6, how much more will I
offer for the firm than it is really worth

I
am buying a firm with an expected perpetual cash flow of $650 but
am unsure of its risk. If I think the beta of the firm is zero,
when the beta is really 1, how much more will I offer for the firm
than it is truly worth? Assume the risk-free rate is 5% and the
expected rate of return on the market is 13%

i am buying a firm with an expected perpetual cash flow of $490
but am unsure of its risk. If I think the beta of the firm is zero,
when the beta is really 1, how much more will I offer for
the firm than it is truly worth? Assume the risk-free rate is 7%
and the expected rate of return on the market is 14%.
(Input the amount as a positive value.)
Present value difference
$

A.) Assume that the risk-free rate of interest is 6% and the
expected rate of return on the market is 16%. A stock has an
expected rate of return of 4%. What is its beta?
B.) Assume that both portfolios A and B are well diversified,
that ?(?a ) = 12%, and ?(?b ) = 9%. If the
economy has only one factor, and ? a = 1.2, whereas ? b = 0.8,
what must be the risk-free rate?

Assume the risk-free rate of interest is 5% and the expected
return on the market is 12%. If you are evaluating a project with a
beta of 1.3 and an IRR of 17%, and you draw the security market
line (SML) to guide your decision, which of the following
statements is true?
a.
The vertical intercept of the SML will be 7%.
b.
The project’s IRR of 17% falls on the SML.
c.
The project’s IRR of 17% falls below...

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...

a) Assume that the risk-free rate of interest is 4% and the
expected rate of return on the market is 14%. A share of stock
sells for £68 today. It will pay a dividend of £3 per share at the
end of the year. Its beta is 1.2. What do investors expect the
stock to sell for at the end of the year?
b) Suppose that there are two independent economic factors, F1
and F2. The risk-free rate is 6%....

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