User Account

All Pages

Suppose a three-factor apm holds and the risk-free rate is

Assignment Help Finance Basics
Reference no: EM13484387 , Length: 10

Suppose a three-factor APM holds and the risk-free rate is 6 percent. You are interested in two particular stocks. A and B. The returns on both stocks are related to factors 1 and 2 as follows.

r = 0.06 + b1 (0.09) - b2 (0.03) + b3 (0.04)

The sensitivity coefficients for the two stocks are given below.

Stock

b1

b2

b2

A

0.70

0.80

0.20

B

0.50

0.04

0.20

Calculate the expected returns on both stocks. Which stock requires a higher return?

Reference no: EM13484387

Questions Cloud

Suppose that the rate of inflation accelerates from 5 to : suppose that the rate of inflation accelerates from 5 to 10 percent per year. would firms cash balances go up or down
Why do firms grant cofee credit would it be more efficient : why do firms grant ?ofree?? credit? would it be more efficient if all sales were for cash and late payers were charged
If you were a credit manager to which financial ratios : if you were a credit manager to which financial ratios would you pay most attention? which do you think would be the
What is the expected variance of a portfolio of 5 10 20 50 : assume that the average variance of return for an individual security is 50 and that the average covariance is 10.
Suppose a three-factor apm holds and the risk-free rate is : suppose a three-factor apm holds and the risk-free rate is 6 percent. you are interested in two particular stocks. a
N companys last dividend d0 was 1 earnings and dividends : n companys last dividend d0 was 1. earnings and dividends are expected to grow at a 5 percent rate. the required rate
What proportion of the following investors wealth would : every investor in the capital asset pricing model owns a combination of the market portfolio and a riskless asset.
The common stock of the nicolas corporation is currently : the common stock of the nicolas corporation is currently selling at 80 per share. the leadership of the company intends
Tom laboratorys common stock is currently selling at 60 : tom laboratorys common stock is currently selling at 60 per share. the next annual dividend is expected to be 3 per

Reviews

Write a Review

Finance Basics Questions & Answers

  How much would you pay for a treasury bill

How much would you pay for a Treasury bill that matures in 182 days and pays $10,000 if you require 1.8% discount rate?

  Use the internet to research the apple corporation its

use the internet to research the apple corporation its current position and reputation regarding ethical and social

  Computation of security market line

Computation of Security Market Line (SML) of stocks and its analysis and Assume a U.S. Treasury rate of 3% as the risk free rate in your SML

  Determine the forward price assuming no arbitrage give the

on monday 18 november 2013 an investor takes a short position in a forward contract on royal dutch shell shares with

  Determine stock price

CK's earnings and dividends will grow at .5 percent monthly for next five years. After that the growth will stop. For year sixnd afterward, it will pay out all earnings as dividends.

  An investment strategy

What would your recommendations be to your clients? Please make sure to discuss how you would convince the young adult to invest.

  Derivative markets

Examine the complexities of derivative markets and how the reporting of derivatives may be deceiving to investors.

  Determining the need for external financing

Discuss and explain different ways a financial manager can determine his or her future financing needs. Include ways of estimating the need for external financing.

  Why is it unsual for yields on longer term notes

what expectation would lead a rish neutral investor to buy the 2 note (instead of the 1 year) given its lower yield? (please involve a specific number)

  Explain valuation of bond for different ytms

Explain Valuation of bond for different YTMs compute the current price of the bonds if the present yield to maturity is 6 percent and 12 percent

  Multiple choice questions on dividend policy1nbspnbsp

multiple choice questions on dividend policy.1.nbspnbsp matrix corporation follows the residual dividend policy. in a

  What is the maximum monthly charge cookie cutter

Illustrate what is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the beginning of the month.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd