Computation of expected rate of return using capm approach

Reference no: EM1316479

Computation of expected rate of return using CAPM approach

The 10-year bonds of Gator Corporation are yielding 8 percent per year. Treasury bonds with the same maturity are yielding 6.4 percent per year. The real risk-free rate (k*) has not changed in recent years and is 3 percent. The average inflation premium is 2.5 percent and the maturity risk premium takes the form: MRP = 0.l%(t - l) where t = number of years to maturity. If the liquidity premium is 0.5 percent, what is the default risk premium on the corporate bond?

Reference no: EM1316479

Questions Cloud

Group means for a significant difference : Using the appropriate statistical procedure on the SPSS, test the between group means for a significant difference.

Describe hyper-geometric distribution : What is the probability that two of absent students were girls.What is the probability that two of absent students were boys.

Evaluation of stock price and stock : Calculation of stock price and stock to be allotted with given data - c. How many shares of common stock must be issued at the value computed in part b to eliminate the deficit computed in part a?

Any significant difference among two proportions : To test is there any significant difference among two proportions. The Damon family owns a large grape vineyard in western New York along Lake Erie.

Computation of expected rate of return using capm approach : Computation of expected rate of return using CAPM approach and what is the default risk premium on the corporate bond

Production function-statistical significance of function : You are planning a short-run production function for your firm, and you have collected the following data on labour usage and output: Calculate estimates of total. Average, and marginal products when the firm employs 23 workers

Assume that a normal model can be applied : Environmental Protection Agency (EPA) fuel economy estimates for automobile models tested recently predicted a mean of 24.80 mpg and a standard deviation of 6.2mpg for highway driving. Assume that a normal model can be applied.

Find rogers'' breadeven level of sales : CVP analysis involves calculation of breakeven point in units - Find Rogers' breadeven level of sales at the level of fixed operating cost?

Preparing tables of descriptive statistics : Prepare tables of descriptive statistics (mean, median, Quartiles, IQR, and Standard Deviation) by firm for net profit margin (PROFITS). Discuss.

User Account

All Pages