The change in the market risk premium

Assignment Help Financial Management

Reference no: EM131884528

Beta and required rate of return A stock has a required return of 13%; the risk-free rate is 4%; and the market risk premium is 3%.

What is the stock's beta? Round your answer to two decimal places.__________

If the market risk premium increased to 10%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. (CHOOSE CORRECT ANSWER BELOW )

I. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.

II. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.

III. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.

IV. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium.

V. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. New stock's required rate of return will be %. Round your answer to two decimal places.

New stock's required rate of return will be ______%. Round your answer to two decimal places.

Reference no: EM131884528

Questions Cloud

Hedge against a rise in price of jet fuel using crude oil : How much money will they make on the contract if they are correct in their prediction?

What are the binding policies adopted by the language : Write a short paper on C macros, comparing them with routines. What are the binding policies adopted by the language?

Define the information security governance and management : Define the information security governance and management tasks that senior management needs to address.

Provide a full description of a simplesem implementation : Provide a full description of a SIMPLESEM implementation of call by value. Provide a full description of a SIMPLESEM implementation of call by result.

The change in the market risk premium : If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.

Develop a disaster recovery plan for recovering : Develop a disaster recovery plan (DRP) for recovering from a major incident or disaster affecting the organization.

What inventory system do you use and why : You own Widgets ‘R Us and are preparing your year-end financial statements. What inventory system do you use and why? What are its advantages and disadvantages

What is the variance of portfolio : What is the variance of a portfolio that invests $30 in Stock A and $90 in Stock B?

Why the static and dynamic links have same value for blocks : Discuss a SIMPLESEM abstract implementation using dynamic allocation for C4' nested blocks. Explain why the static and dynamic links have same value for blocks.

User Account

All Pages