Historical returns-expected and required rates of return

Assignment Help Financial Management
Reference no: EM13917522

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? Round your answer to two decimal places. What is the beta of Stock Y? Round your answer to two decimal places. What is the required rate of return on Stock X? Round your answer to one decimal place. What is the required rate of return on Stock Y? Round your answer to one decimal place. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to one decimal place.

Reference no: EM13917522

Questions Cloud

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?
Chain of crafting shops : Bejeweled, a chain of crafting shops, is selling 500,000 shares of stock in an auction IPO. At the end of the bidding period they have received the bids shown above. Which of the following is closest to the price at which the shares will be offered?

Reviews

Write a Review

Financial Management Questions & Answers

  What are your initial impressions of the country rankings

What are your initial impressions of the country rankings in the Doing Business study? What is unique to the top 10 countries according to the ease of doing business (EDB) scale, and what is unique to those countries to where EDB is highly unfavorabl..

  Using the perpetual growth method

Suppose the dividends for the Seger Corporation over the past six years were $1.02, $1.10, $1.19, $1.27, $1.37, and $1.42, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method.

  Determine future value

Suppose you deposit $1000 in one year, $2000 in two years, and $4000 in three years. Assume a 4 percent interest throughout. How much will you have in 5 years?

  Assume that the securities are correctly priced

You have been given the following information on two corporations; you are to assume that the securities are correctly priced. My Corp, Inc. has a Beta of 1.25 and an Expected Return of .145; Your Corp, Inc. has a Beta of .75 and an Expected Return o..

  What is freds total initial margin

Fred has just sold short 3 contracts of May wheat on the CBT. These are 5,000 bushel contracts. The initial deposit is $1,500 per contract with a maintenance margin of $1,200. What is Fred's total initial margin? How much of an increase in the price ..

  Both warrants and convertibles are type of option securities

Both warrants and convertibles are types of option securities. Warrants bring in additional funds when exercised, while convertibles do not. Return on Assets will fall after a Convertible Bond is exchanged for equity.

  Offered an investment plan

You have $18,750 you want to invest for the next 30 years. You are offered an investment plan that will pay you 9 percent per year for the next 15 years and 13 percent per year for the last 15 years. How much will you have at the end of the 30 years?..

  What is this projects equivalent annual cost or EAC

A five-year project has an initial fixed asset investment of $265,000, an initial NWC investment of $21,000, and an annual OCF of −$20,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..

  What is the nal of leasing

High electricity costs have made Farmer Corporation’s chicken-plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis.  What is the NAL ..

  Higher plow back ratio means ratio

All else the same, a higher plow back ratio means a(n) _________P/E ratio. You wish to earn a return of 10% on each of two stocks,A and B.Each of the stocks is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividen..

  Assume that the risk free rate and the market premium

Assume that the risk free rate is 6% and the market premium is 5%. What are the betas of stocks X and Y?. What are the required rates of return on stocks X and Y?

  Cost of capital of the rate at which the company pays taxes

A company wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. the firms wishes to maintain a capital structure of 25% debt, 15% preferred stock, and 60% common stock. Can someone please explain me how to s..

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