Both stocks have the same reward-to-risk ratio

Assignment Help Financial Management
Reference no: EM13876335

Stock A has an expected return of 12% and a beta of 1.2. Stock B has an expected return of 9% and a beta of 0.8. Both stocks have the same reward-to-risk ratio. What is the risk-free rate? (Please explain the calculation.)

a. 3.0%

b. 4.0%

c. 4.5%

d. 2.5%

e. 3.5%

Reference no: EM13876335

Questions Cloud

Assume poisson distribution : Customers arrive at a bank teller’s booth at a rate of 2 per minute. What is the probability (to four decimal places) that 4 customers will arrive at the bank teller’s booth within the next minute (assume a Poisson distribution)?
Importance of the time value of money concepts : Define and discuss the importance of the time value of money concepts including compounding (future value), discounting (present value), and annuities. Why do organization leaders need to understand these concepts?
The course is introduction to public finance : The course is Introduction to Public Finance. The question in place this week is related to healthcare in the USA.  Please answer the following question in one page. Based on what you have learned and your own research what do you think is right and ..
Movie review - clean and sober : Movie Review- Please watch the following movie and provide a one page report on it. Movie: Clean and Sober
Both stocks have the same reward-to-risk ratio : Stock A has an expected return of 12% and a beta of 1.2. Stock B has an expected return of 9% and a beta of 0.8. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?
The relative value of the euro : The Eurozone has some countries with severe debt problems: Portugal, Ireland, Italy, Greece and Spain ... sometimes known as PIIGS. These Euro countries are looking for and have been assured of a "bail-out" process so that no one defaults on their de..
Brief review of the book- the soup : Need a brief review chapter-by-chapter of "the soup" by Jon Gordon. Can be from 2-3 sentences per chapter as long as the theme or the message of the particular chapter is conveyed.
Real risk-free rate of interest-what is treasury securities : The real risk-free rate of interest is 4%. Inflation is expected to be 2% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury s..
Movie review - who afraid of virginia woolf : Please watch the following movie and provide a one page report on it. Movie: Who's Afraid of Virginia Woolf

Reviews

Write a Review

Financial Management Questions & Answers

  What is bobs gross income

What is Bob's GROSS INCOME from this information? This is an accounting question. Your client is Bob Jones. Bob, age 60 and single, has recently retired from IBM. He has $690,000 available in his 401(k) fund and he is thinking of using that money to ..

  What is the bonds value

A US Industries bond has an 8 percent coupon rate and a $1,000 face value. Interest is paid semi-annually, and the bond has 20 years to maturity. If investors require a 10 percent yield to maturity, what is the bond’s value?

  How did the audited and unaudited financial statement differ

Review the financial statements,located in the Patton-Fuller Community Hospital Virtual Organization. How did the audited and unaudited financial statements differ

  What will be the approximate capital gain of this bond

A bond has a par value of $1,000, a time to maturity of 15 years, and a coupon rate of 7.60% with interest paid annually. If the current market price is $760, what will be the approximate capital gain of this bond over the next year if its yield to m..

  How long does it take to collect its credit sales

A company reports the following financial information: Inventory $200; Accounts Receivable $304; Cash $104; Prepaid expenses $417; credit sales $1,869. How long does it take to collect its credit sales?

  The evening telegram states bond price

The Evening Telegram states a bond price at $97.00, while it yields is reported at 6%. If there are 7 years left to maturity on this bond, what then, is this bond's coupon? Is it $48, $50, $53, or $55?

  Problem related to the capital expenditure budget

If you were assigned to prepare a capital expenditure budget request to add a retail pharmacy in the hospital, which two individuals from your department(s) would you want to have on your team to help you?

  What is the market value of preferred equity

The company has 1M shares of preferred stock, $10 per share. What is the market value of preferred equity?

  Problem 1what pairing of options would come closest to

problem 1what pairing of options would come closest to achieving the same risk management attributes of a eurusd six

  Assume the market is in equilibrium with the required return

Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.75 coming 3 years from today. The div..

  What amount will the following investment accumulate

To what amount will the following investment accumulate? $26,580, invested today for 3 years at 18.77 percent, compounded monthly.

  Earn higher rate of return on your investments

Which of the following conclusions would be true if you earn a higher rate of return on your investments? If the interest rate is positive, then the future value of an annuity due will be greater than the future value of an ordinary annuity.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd