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Calculate stock a beta

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1. Your investment club has only two stocks in its portfolio. $30,000 is invested in a stock with a beta of 0.7, and $55,000 is invested in a stock with a beta of 1.4. What is the portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places.

2. AA Corporation's stock has a beta of 0.4. The risk-free rate is 2%, and the expected return on the market is 10%. What is the required rate of return on AA's stock? Do not round intermediate calculations. Round your answer to one decimal place.

3. Suppose rRF = 4%, rM = 9%, and rA = 12%.

a. Calculate Stock A's beta. Round your answer to one decimal place.

b. If Stock A's beta were 2.4, then what would be A's new required rate of return? Round your answer to one decimal place.

4. Stock R has a beta of 1.4, Stock S has a beta of 0.75, the expected rate of return on an average stock is 9%, and the risk-free rate is 7%. 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.

5. LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 5.7%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt? Round your answer to two decimal places.

Reference no: EM132534697

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