Expected return and market risk premium

Assignment Help Financial Management
Reference no: EM131025707

Stock Y has a beta of 1.20 and an expected return of 12.7 percent. Stock Z has a beta of .90 and an expected return of 11.1 percent. If the risk-free rate is 4.5 percent and the market risk premium is 7.1, are these stocks correctly priced?

Reference no: EM131025707

Questions Cloud

Two contracts for the exclusive right to manufacture : A manufacturer offers an inventor the choice of two contracts for the exclusive right to manufacture and market the inventor’s patented design. Plan 1 calls for an immediate single payment of $261464. Plan 2 calls for an annual payment of $14790 plus..
Calculate the cooling water flow rate in the condenser : The temperature of the milk at the inlet of H is 408C, the temperature of the cooling water at the inlet of the condenser is 208C, the steam introduced into the chamber H is saturated at 475.8 kPa pressure, and the heat capacity of the milk is 3.8..
What is the approximate probability that stock will return : A stock had returns of 4 percent, 11 percent, 16 percent, -6 percent, and -2 percent for the past five years. Based on these returns, what is the approximate probability that this stock will return at least 20 percent in any one given year?
Find the slope of each line that has a slope : Find an equation in the form y=ms +b (where possible) for each line.
Expected return and market risk premium : Stock Y has a beta of 1.20 and an expected return of 12.7 percent. Stock Z has a beta of .90 and an expected return of 11.1 percent. If the risk-free rate is 4.5 percent and the market risk premium is 7.1, are these stocks correctly priced?
Problem regarding the income and expenses : Assume the 2014 rules apply for purposes of the qualified education expense deduction and that the employer portion of the self-employment tax on Jessie's income is $808. Joe and Jessie have summarized the income and expenses they expect to report..
Cease paying dividends forever : Robber Corp. pays a constant $9 dividend on its stock. The company will maintain this dividend for the next 13 years and will then cease paying dividends forever. If the required return on this stock is 9.5 percent, what is the current share price?
Calculate the slope of the lines through the points : A revenue function is R(x)=28x and a cost function is C(x)=-15x+344.
Level of the supply chain and give : Discuss and define the types of inventory which are held at each level of the supply chain and give justifications for the necessity of holding the stock.

Reviews

Write a Review

Financial Management Questions & Answers

  Your firm has a line of credit with your local bank

Your firm has a line of credit with your local bank for $50,000. The loan agreement calls for interest of 9% with a 5% compensating balance requirement which is based on the total amount borrowed. What is the effective interest rate if you need $42,7..

  How much loss would company recognize on income statement

Randy's tireland makes a product that sells for $69 per unit and has $53 per unit in variable costs. Annual fixed costs are $24,000. If Rambles sells 10 units less than breakeven, how much loss would the company recognize on its income statement?

  Determine the accumulated amount of her investment

Emily is in the 25% bracket and has $15,000 available for investment during her current tax year. Assume that she remains in the same tax bracket over the next 7 years and determine the accumulated amount of her investment if she puts the $15,000 int..

  Calculate classical payback period assuming cost of funds

Consider a project with an initial outlay of $1,000 and yearly cash flows as follows: -200, -100, 300, 300, 300, 100, 100, 200, 700, 400, and 100. Calculate the classical payback period assuming 10% cost of funds.

  Expected return-standard deviation of investors portfolio

Two companies Amber and Bolt are manufacturers of glass. The securities of the companies are listed and traded in the New York Stock Exchange. An investor’s portfolio consists of these two securities in the proportion of 5/6 and 1/6 respectively. Cal..

  Please show formulasa balance sheet shows a total of

please show formulas.a balance sheet shows a total of noncallable 45 million. long-termdebt with a coupon rate of 7.00

  What will be the firms operating cycle

Suppose that Dunn Industries has annual sales of $4.05 million, cost of goods sold of $1,620,000, average inventories of $1,086,000, and average accounts receivable of $720,000. Assume that all of Dunn’s sales are on credit. What will be the firm’s o..

  Calculate the profitability index of each given project

Calculate the Profitability Index (PI) of each project, assess its acceptability, and indicate which project is best using PI. Which of the two mutually exclusive projects would you recommend Touchtone Pty Ltd undertake? Why.

  Semiannual coupon payments and yield to maturity

Wine & Rose Inc. offers a 6 percent coupon bond that has a $1,000 par value, semiannual coupon payments and a yield to maturity of 5.43 percent. The bond matures in 9 years. What is the price of the bond? What will happen to the price if market inter..

  All other ratios-including dividend payout ratio

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, and ships them to its chain of retail stores. Sales for 2013 were $350 million, while net income for the year was $10.5 million. Upton paid divid..

  What is the target variable cost per mouse

A company believes it can sell 5,600,000 of its proposed new optical mouse at a price of $10.00 each. There will be $8,000,000 in fixed costs associated with the mouse. If the company desires to make a profit $2,000,000 on the mouse, what is the targ..

  Calculate the equity capital ration

Calculate the equity capital ration. If 2 billion in bad loans were removed from the bank's assets, show how the equity capital ratio would change.

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