solution
solution.
The rate of return on the risk-free asset is 3 percent. What is the expected return of the overall stock market if the market risk premium is 5 percent?
(Continuing from the previous problem, note that BFA Inc. has a beta of 1.3. What is the required rate of return for the BFA Inc.? (Use the market data, e.g. risk-free rate, etc. from the previous problem.) the answer to this is 9.5%)
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Order Paper Now| A. |
10.0% |
|
| B. |
13.7% |
|
| C. |
10.9% |
|
| D. |
18.1% |
|
| E. |
8.0% |
|
| F. |
8.9% |
The required rate of return for Mallwart is 12 percent. The risk-free rate is 4 percent and the market risk premium is 5 percent. Estimate the beta for the Mallwart stock. Now, assume that all other items remain the same but the risk-free rate rises to 6 percent. What will be the required rate of return on Mallwart stock after this change in the risk-free rate?
| A. |
10.78% |
|
| B. |
11.09% |
|
| C. |
9.42% |
|
| D. |
14.00% |
|
| E. |
13.26% |
|
| F. |
12.37% |
| Economy Growth State | Probability Pi | Cash Flow Xi | |
| Weak | 0.2 | 2,000 | |
| Moderate | 0.4 | 6,000 | |
| Normal | 0.3 | 10,000 | |
| High | 0.1 | 15,000 |
expected value of cash flows is 7,300
-
What is the variance of the cash flows?
A. 14,410,000
B. 15,555,990
C. 24,600,000
D. 19,666,100
E. 27,177,300
F. 18,460,700
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