Two stocks to be correctly priced relative to each other

Assignment Help Financial Management

Reference no: EM13885403

Stock Y has a beta of 1.45 and an expected return of 15.1 percent. Stock Z has a beta of 0.9 and an expected return of 11.8 percent. Required: What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Risk-free rate %

Reference no: EM13885403

Questions Cloud

Determine the payback period-npv and irr for both project : Determine the Payback period, NPV and IRR for both project A and B (show work). Which Project would you select and why? Be specific. Project A will require an initial investment of $ 200,000 and Project B will require and initial investment of $ 325,..

Based on the expected activity of copies : Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of copies: The costs are assigned to two ..

A fast-growing firm recently paid a dividend : A fast-growing firm recently paid a dividend of $0.90 per share. The dividend is expected to increase at a 10 percent rate for the next three years. Afterwards, a more stable 5 percent growth rate can be assumed. If a 6 percent discount rate is appro..

What amount of fica tax will rasheed pay for the year : Rasheed works for Company A, earning $350,000 in salary during 2014. Assuming he has no other sources of income, what amount of FICA tax will Rasheed pay for the year?

Two stocks to be correctly priced relative to each other : Stock Y has a beta of 1.45 and an expected return of 15.1 percent. Stock Z has a beta of 0.9 and an expected return of 11.8 percent. Required: What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?

Should the preferred stock include a call provision : The Tsetsekos Company was planning to finance an expansion. The principal executives of the company all agreed that an industrial company such as theirs should finance growth by means of common stock rather than by debt. Should the preferred stock in..

About the warrants : Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $28. Calculate the exercise value of the firm's warrants if the common sells at each of the following prices: What dollar co..

Price would you expect solar incorporateds stock to sell : Solar Inc. pays a current dividend of $2.50 per share annually. This dividend is expected to grow at the rate of 3.25% per year for the foreseeable future. Rating LLC has given Solar Inc. a beta score of 1.05.The risk-free rate of return is currently..

What is the effective interest per year : George bought a car for $26,500. He made a down-payment of $4,500 and financed the rest on a 5-year term with a monthly payment of $575. A) What is the interest rate per month for the loan? B) What is the nominal interest per year? C) What is the eff..

User Account

All Pages