Using the assumptions of the capital asset pricing model

Assignment Help Financial Management

Reference no: EM131507219

Part A:

The expected return on the entire stock market is 14% this year. The required rate of return on ABC stock is 12.7%. US Treasury securities are expected to earn 4.4%. Using the assumptions of the capital asset pricing model, what is ABC's beta? (Show your answer to two decimal places, e.g., 12.34)

Part B:

If the market risk premium is 8 percent and the risk-free rate is 3.9, what is the expected rate of return for a stock with a beta of 0.58 under the Capital Asset Pricing Model (CAPM)? (show your answer in decimal form to four places)

Part C:

ABC has a beta of 1.61. The expected return for the S&P 500 stock index is 14.3 percent and U.S. Treasuries are expected to yield 3.4 percent. Based on the Capital Asset Pricing Model (CAPM), what is ABC's expected rate of return? (show your answer in decimal form to four places)

Part D:

The rate on US Treasury securities is 2.1% and the expected return on the S&P 500 stock market index is 17.6%. Under the capital asset pricing model, what would be the expected return on a stock with a beta of 2.1? (Show your answer as a decimal to three places, e.g., if the answer is 12.3% input 0.123)

Reference no: EM131507219

Questions Cloud

What is the operating cash flow for this project : what is the Operating Cash Flow for this project?

What is standard deviation of these returns : What is the standard deviation of these returns?

Ethical practices for cybersecurity investments-purchases : You have been invited to participate in a "lightning round" panel on the above topic at a conference on Best Practices for IT Security Management.

What is the role of the individual you interviewed : What company do you work for and what is the role of the individual you interviewed?What are your thoughts on your colleague's response?

Using the assumptions of the capital asset pricing model : The expected return on the entire stock market is 14% this year. Using the assumptions of the capital asset pricing model, what is ABC's beta?

Online ordering and delivery service for sandwich shop : Joe's Sub Shop is starting an online ordering system that will provide local delivery within five miles of the sub shop.

What are the epw vpw and sdpw of the project : The tree diagram in Figure describes the uncertain cash flows for an engineering project. The analysis period is two years, and MARR = 15% per year.

What is expected interest rate on one year bond in two years : What is the expected interest rate on a 1-year bond in two years?

How far should the right to freedom of speech extend : How far should the right to Freedom of Speech extend? Are there instances where you believe this right should be further limited or extended?

User Account

All Pages