The risk premium of a stock with beta value

Assignment Help Financial Management
Reference no: EM131020812

If the market risk premium is 8%, then according to the CAPM, the risk premium of a stock with beta value of 1.7 must be:

A. less than 12%.

B. 12%.

C. greater than 12%.

D. cannot be determined.

Reference no: EM131020812

Questions Cloud

With living expenses that will grow with inflation : For an individual planning to retire in ten years, with a thirty-year life expectancy in retirement, and with living expenses that will grow with inflation, what is the risk-free investment?
Call either of the two perpetual bond issues : Charles River Associates is considering whether to call either of the two perpetual bond issues the company currently has outstanding. If the bond is called, it will be refunded, that is, a new bond issue will be made with a lower coupon rate. The pr..
Employer has agreed to place year-end deposits : Your employer has agreed to place year-end deposits of $1000, $2000, and $3000 into your retirement account. The $1000 deposit will be one year from today, the $2000 deposit two years from today, and the $3000 deposit three years from today. If your ..
What will be the value of the call provision to the company : Illinois Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 8.0 percent, payable annually. The one-year interest rate is 8.0 percent. What will be the value of the call provision to the company? What will the mark..
The risk premium of a stock with beta value : If the market risk premium is 8%, then according to the CAPM, the risk premium of a stock with beta value of 1.7 must be:
Determination of issues like unemployment and inflation : Microeconomics focuses on the determination of issues like unemployment, inflation, and interest rate.  It is meaningful to make a comparison between Japanese GDP and German GDP
Problem regarding the it project management : The triple constraints for creating cost estimates include resources, time and money. What cost estimation approaches provide consistent triangulation of triple constraints for creating accurate estimates? Should different approaches be used for d..
Explain why this change may have taken place : Suppose that the fixed cost of preparing a codex was 58 drachmas and that there was no similar fixed cost for a scroll. Would an ancient book publisher who intended to sell 5 copies of a book be likely to publish it as a scroll or as a codex? What..
Explain what is meant by the value style and growth style : Explain what is meant by the value style and growth style in equity investments. What sort of return and volatility have been experienced over long periods of time for each of these styles?

Reviews

Write a Review

Financial Management Questions & Answers

  Annual coupon bond with a face value

Consider an five-year, 12 percent annual coupon bond with a face value of $1,000. The bond is trading at a rate of 9 percent. What is the price of the bond? If the rate of interest increases 1 percent, what will be the bond’s new price?

  How can investors deal with different degrees of risk

Why are investors risk-averse? How can investors deal with different degrees of risk? What is the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio? What is the beta coeff..

  How many years do these bonds have left until they mature

LKD Co. has 14 percent coupon bonds with a YTM of 8.9 percent. The current yield on these bonds is 9.5 percent. How many years do these bonds have left until they mature?

  Emergency response bonds-annual yield to maturity

Evans Emergency Response bonds have 5 years to maturity. Interest is paid semi annually. The bonds have a $1,000 par value and a coupon rate of 9 percent. If the price of the bond is $1,085.55, what is the annual yield to maturity? (Do not round inte..

  Differences between a micro hedge and a macro hedge

What are the differences between a micro hedge and a macro hedge for an FI? Why is it generally more efficient for FIs to employ a macro hedge than a series of micro hedges?

  Two coworkers in the sales department

You overhear Bob and Jane, two coworkers in the sales department of Weston Corporation, having an informal discussion about the financial condition of one of their customers who has placed a large order. Bob states that things are really going well f..

  What is the cost of common from reinvested earnings

Orange Logistic is thinking of opening a new warehouse, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new warehouse. No new working capi..

  What is the present value of your winnings

You just won the lottery, which promises you $260,000.00 per year for the next 20 years, starting today. That is, this is an annuity due. If your discount rate is 7.00%, what is the "present value" of your winnings?

  Find the firms debt ratio

Given the following information for the Duke Tire Company, find the firm's debt ratio (i.e., total liabilities / total assets): ROE (N/E) = 0.24 (expressed as a decimal)

  Dividends are anticipated to maintain growth rate

The next dividend payment by Blue Cheese, Inc., will be $1.92 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. The stock currently sells for $38 per share. What is the expected capital gains yield? What is the ..

  What rate of return should investors require on this fund

Assume that you are the portfolio manager of the SF Fund, that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 5.00%. What rate of return should investors require on this fund? Amount Beta ..

  What profit margin must the firm achieve

Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 9 percent a year, a debt-equity ratio of .41, and a dividend payout ratio of 32 percent. The ratio of total assets to sales is constant at 1.34. What profit margin must the firm ..

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