The risk-free rate of return and market rate of return

Assignment Help Financial Management
Reference no: EM131514956

Campiti Inc. stock has a beta of .91 and an expected return of 10.21 percent. The risk-free rate of return is 3.60 percent and the market rate of return is 11.84 percent. Which one of the following statements is true given this information?

A. Campiti stock is underpriced.

B. The expected return on Campiti stock based on the capital asset pricing model is 9.88 percent.

C. The return on Campiti stock will graph below the security market line.

D. Campiti stock is correctly priced.

Reference no: EM131514956

Questions Cloud

How big a pump is necessary : An airplane owner wants to install a fuel filter into his fuel line. In the event the engine-driven fuel pump (inside the engine) fails, the electric fuel pump.
Discuss about the mental health of inmates : Develop one or two paragraphs from 6-8 articles describing in brief evidence-based, peer-reviewed journal articles focusing on mental health of inmates.
Determine the gauge pressure : Water is flowing from a pressurized tank as in the sketch. The pipe is an 8-in. Schedule 40 steel pipe. Determine the gauge pressure at 1.
What aristotle calls a catharsis : What story or character in a story generated what Aristotle calls a "catharsis?" Describe your emotional response.
The risk-free rate of return and market rate of return : The risk-free rate of return is 3.60 percent and the market rate of return is 11.84 percent.
Why is your choice a good example of poetic justice : Give an example of poetic justice in a story you like. Why is your choice a good example of poetic justice?
What is the standard deviation of the returns this stock : There is a 30% chance of a boom economy. What is the standard deviation of the returns this stock?
Aristotles aesthetic principle : Which elements are obviously connected to Aristotle's aesthetic principles? Is the story believable?
Calculate the equivalent length of the elbow : An experiment is performed to check the equivalent length of a standard elbow in a galvanized iron pipe system. The pressure drop p1-p2 between two taps 10 ft.

Reviews

Write a Review

Financial Management Questions & Answers

  Obtain the cost of the equity capital

If the RTY Corp. follows CAPM and has a beta of 2.0, and the market ans risk-free rate of return are 14 and 8 percent, respectively. Obtain the cost of the equity capital for the RTY Corporation.

  Required rate of return

Assume that the risk-free rate is 6.5% and the expected return on the market is 10%. What is the required rate of return on a stock with a beta of 2.3?

  How much should the compensation be

Robbins Petroleum Company is four years in arrears on cumulative preferred stock dividends. There are 780,000 preferred shares outstanding, and the annual dividend is $4.50 per share. How much should the compensation be?   Based on market value, how ..

  What is effective or equivalent-annual cost of trade credit

The Thompson Corporation projects an increase in sales from $1.5 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion. What is the effective, or equivalent, annual cost of the trade credit?

  What is the projected NPV using a discount rate

Big steve's makers of swizzle tickets is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 nd will generate net cash inflows of $16,000 per year for 8 years. What is the projected NPV u..

  Find weight of equity-weight of preferred stock capital

Gold Diggers, Inc. has 800,000 shares of common stock, currently trading at $45/share. The common stock of Gold Diggers, Inc. is expected to generate a dividend of $3.00/share next year, and it has a Beta calculated at .95. Find Weight of equity,Weig..

  Insurance company are entirely non-systematic

An insurance company’s losses of a particular type per year are to a reasonable approximation normally distributed with a mean of $150 million and a standard deviation of $50 million. (Assume that the risks taken on by the insurance company are entir..

  Determine the break-even point

Davison Toaster Corp. sells its products for $100 per unit. It has the following costs: not enough information has been provided to determine the break-even point.

  Stuart hall who notified the entire globe to the issue.

While Herr Blatter will also be keen to avoid artificial leg growth he will also take note that the items in the players' bermuda are most in need of tight control. It was none other than the expert commentator Stuart Hall who notified the entire ..

  Euros using the forward contract will lose money

what is the probability that a speculator who sold euros using the forward contract will lose money?

  What is the realized rate of return for those investors

Five years ago, Midway Community Hospital issued 20-year municipal bonds with a 9 percent annual coupon rate. The bonds were called today for a $90 call premium – that is, bondholders received $1,090 for each bond. What is the realized rate of return..

  Nominal rate with interest compounded daily

You plan to invest? $5,000 at the end of each of the next 10 years in an account that has a 9 percent nominal rate with interest compounded daily. How much will be in your account at the end of the 20? years?

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