The risk free rate that satisfies these conditions

Assignment Help Financial Management
Reference no: EM131520329

A stock with a beta of 1.03 has an expected return of 13% and an alpha of -2.85% when the market expected return is 15.5%. What must be the risk free rate that satisfies these conditions?

3.84%

3.86%

3.83%

3.85%

Reference no: EM131520329

Questions Cloud

Make a large investment in coal to liquids gasoline : The Charvon oil company is planning to make a large investment in coal-to-liquids (CTL) gasoline.
Based on the constant-growth dividend discount model : what is the required return applicable to the investment based on the constant-growth dividend discount model (DDM)?
What is the resulting portfolio beta : Stock A has a beta of 0.9, Stock B has a beta of 1.05 and Stock C has a beta of 1.25. What is the resulting portfolio beta?
Suppose cash flows and their times of payment are certain : Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is 10%.
The risk free rate that satisfies these conditions : What must be the risk free rate that satisfies these conditions
Uses effective-interest amortization method : On January 1, 2016, Tonika Company issued a seven-year, $10,000, 6% bond. Tonika uses the effective-interest amortization method.
Expected dividend yield-expected capital gain : A stock with a beta of 1.6 has an expected dividend yield of 6% and an expected capital gain of 13%.
Identify predominant industry in which your company operates : What conclusions can you draw regarding your company's performance? Identify the predominant industry in which your company operates.
Estimated intrinsic value per share of common stock : what is Praxis Corp.'s estimated intrinsic value per share of common stock?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the free cash flow from the project in year one

A new project is expected to generate $800,000 in revenues, $250,000 in cash operating expenses, and depreciation expense of $150,000 in each year of its 10-year life. The corporation’s tax rate is 35%. The project will require an increase in net wor..

  Deviations from this expected return

APT: Say a given market index (M) is a well-diversified portfolio and has an expected return of 15%. Deviations from this expected return

  Bond with semiannual payments and a yield to maturity

Wine and Roses, Inc. offers a 5.0 percent coupon bond with semiannual payments and a yield to maturity of 5.63 percent. The bonds mature in 5 years. What is the market price of a $1,000 face value bond? Todd is able to pay $270 a month for 4 years fo..

  Decision influence ultimate amount of cash you will collect

It is a common fact that many lottery winners are “broke” sooner than later. If you won a $1,000,000 lottery, would you want to collect the lump sum winnings today or receive the monies over time? How does your decision influence the ultimate amount ..

  Preferred stock outstanding

Bullseye, Inc.'s 2008 income statement lists the following income and expenses: EBIT = $703,500, Interest expense = $53,000, and Taxes = $220,500. Bullseye's has no preferred stock outstanding and 270,000 shares of common stock outstanding. What are ..

  Returns on stocks are perfectly negatively correlate

The returns on stocks A and B are perfectly negatively correlated (\rho_{AB} = -1). Stock A has an expected return of 21 % and a standard deviation of return of 40%. Stock B has a standard deviation of return of 20%. The risk-free rate of interest is..

  Cash flow amount to use as initial investment in fixed asset

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $5.3 million in anticipation of using it as a warehouse and distribution site, but the comp..

  What is the discount yield and bond equivalent yield

What is the discount yield, bond equivalent yield, and effective annual return on a $1 million T-bill that currently sells at 96 3/8 percent of its face value a

  What is the target stock price one year from today

You have found the following historical information for the Daniela Company over the past four years: Earnings are expected to grow at 19 percent for the next year. Using the company’s historical average PE as a benchmark, what is the target stock pr..

  What is the yield to maturity to the nearest percent

What is the yield to maturity, to the nearest percent, for the following bond: current price is $908, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity?

  Health care organizations capital projects analysis

Explain the Time Value of Money and give two examples of specific use/application in a health care organization's capital projects analysis, accounting for dollar value differences over time.

  Depreciation for income tax purposes

At the beginning of 2013, Norris Company had a deferred tax liability of $7,000, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2012 and 20..

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