Question

Partridge Pllastic's stock has an estimated beta of 1.4, and its required return is 13%. Cleaver...

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?
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Using Partridge Pllastic's stock requied return we can find market risk premium
Required rate of return is = Risk free rate of return+(Beta*Market risk premium)
0.13=0.06+(1.40*Market risk premium)
Market risk premium is = (0.13-0.06)/1.40
Market risk premium is = 5.00%
Required return on Cleaver Motors' stock = Risk free rate of return+(Beta*Market risk premium)
Required return on Cleaver Motors' stock = 6%+(1.20*5%)
Required return on Cleaver Motors' stock = 12%
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Stock R has a beta of 1.4, Stock S has a beta of 0.9, the required...
Stock R has a beta of 1.4, Stock S has a beta of 0.9, the required return on an average stock is 10%, and the risk-free rate of return is 7%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places.
Greshak Company's stock has a beta coefficient of 1.4 and a required rate of return of...
Greshak Company's stock has a beta coefficient of 1.4 and a required rate of return of 14%. The equity risk premium is currently 5%. If the inflation premium increases by 1.0%, and Greshak acquires new assets which increase its beta by 50%, what will be the company’s new required equity rate of return? Select one: a. 18.50% b. 13.50% c. 22.80% d. 15.25% e. 17.00%
A stock has a required return of 13%; the risk-free rate is 5%; and the market...
A stock has a required return of 13%; the risk-free rate is 5%; and the market risk premium is 6%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 10%, what would happen to the stock's required rate of return? Assume the risk-free rate and the beta remain unchanged. New stock's required rate of return will be  %. Round your answer to two decimal places.
Stock A's stock has a beta of 1.30, and its required return is 14.00%. Stock B's...
Stock A's stock has a beta of 1.30, and its required return is 14.00%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Select the correct answer. a. 10.28% b. 10.32% c. 10.44% d. 10.36% e. 10.40%
Stock R has a beta of 1.4, Stock S has a beta of 0.55, the expected...
Stock R has a beta of 1.4, Stock S has a beta of 0.55, 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? Do not round intermediate calculations. Round your answer to two decimal places.
Stock ABC has a beta of 1.4 and the standard deviation of its returns is 30%....
Stock ABC has a beta of 1.4 and the standard deviation of its returns is 30%. The market risk premium is 5% and the risk-free rate is 3%. What is the expected return for the stock? What are the expected return and standard deviation for a portfolio that is equally invested in the stock and the risk-free asset? If you forecast that next year stock ABC will have return of 10%. Would you buy it? Why or why not?
Mulherin's stock has a beta of 1.44, its required return is 9.90%, and the risk-free rate...
Mulherin's stock has a beta of 1.44, its required return is 9.90%, and the risk-free rate is 2.35%. What is the required rate of return on the market?
Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 10.00%, and the...
Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 10.00%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.)
10) Stay-Home's stock has the required return of 10% and beta of 1.2. Given that the...
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?
IR Industries (HR) has a beta of 1.4: UR Industries's (LRI) beta is 0.6. The risk-free...
IR Industries (HR) has a beta of 1.4: UR Industries's (LRI) beta is 0.6. The risk-free rate is 6%, and the required rate of return on an average stock is 13. The speed rate of inflation isk-free rate remains constant, the required return on the market falls to 10.5%, and all butas remain constant. After all of these changes, what will be the difference in the required returns for a calculations. Round your answer to two decimal places.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT