Calculate market risk premium and expected rate of return

Assignment Help Financial Management

Reference no: EM13917523

Stock A has a beta of .2, and investors expect it to return 3%. Stock B has a beta of 1.8, and investors expect it to return 11%. Use the CAPM to calculate the market risk premium and the expected rate of return on the market.

What is the market risk premium %

Expected market rate of return %

Reference no: EM13917523

Questions Cloud

Who needs to be involved in facility location decisions : Who needs to be involved in facility location decisions? Name several ways that technology has had an impact on location decisions.

Inventory system believes that inventory models : A manager of an inventory system believes that inventory models are important decisionmaking aids. Even though often using an EOQ policy, the manager never considered a backorder model because of the assumption that backorders were bad and should be ..

What is the current market price of the bonds : Fresh Water, Inc. sold an issue of 4-year $1,000 par value bonds to the public. The bonds have a 7.23 percent coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, Inc. bonds is 10.31 percent. What is the curr..

Generate expected cash flows : You are considering acquiring a firm that you believe can generate expected cash flows of $27,000 a year forever. However, you recognize that those cash flows are uncertain. a. Suppose you believe that the beta of the firm is 2.1. How much is the fir..

Calculate market risk premium and expected rate of return : Stock A has a beta of .2, and investors expect it to return 3%. Stock B has a beta of 1.8, and investors expect it to return 11%. Use the CAPM to calculate the market risk premium and the expected rate of return on the market. What is the market risk..

Historical returns-expected and required rates of return : Historical Returns: expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 6%. Do not round intermediate calculations. What is the beta of Stock X?

Calculate the average rate of return for each stock : Historical Realized Rates of Return You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stocks A and B have the following historical returns: Calculate the average rate of return..

It does not pay dividends : Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings, hence it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.00 coming 3 years from today..

What are the basic assumptions in locational cost profit : What are the basic assumptions in locational cost profit volume analysis?

User Account

All Pages