What are the required rates of return

Assignment Help Corporate Finance
Reference no: EM13205816

You have observed the following returns over time:

Year Stock X Stock Y Market 2006 14% 13% 12% 2007 19 7 10 2008 16 5 12 2009 3 1 1 2010 20 11 15 Assume that the risk free rate is 6% and the market risk premium is 5%

a. what are the betas of stocks X and Y

b. What are the required rates of return on stocks X and Y

c. What is the required rate of return on a portfolio consisting of 80% of stock X and 20% of stock Y If stock X's expected return is 22%, is stock X under or overvalued?

Reference no: EM13205816

Questions Cloud

Define should the company consider expanding capacity : Night Timers chief engineer anticipates that the product will be sold in ten-foot rolls. At present, the company's maximum production capacity is 140,000 rolls per year. The engineer believes the cost function to b be described by C= $50,000 + 0.2..
Determine what is maxs most profitable course of action : Max Whitley, manager of Whitley Construction, builds new homes in a booming community in the Midwest. Although the sales have slowed down because of a national recession, it now looks as if the recession is about to end. Max wants to be ready with..
Does society receive more welfare to have natural monopolies : Identify the incentives to produce and price the product for a traditional monopoly and natural monopoly. Is it best for society, i.e., does society receive more welfare, to have natural monopolies provided by a private firm or by the government
Explain small table along with one sample calculation : Calculate the five points indicated in the experiment introduction and show these values in a small table along with one sample calculation.
What are the required rates of return : What are the betas of stocks X and Y, what are the required rates of return on stocks X and Y
What are the profit maximizing levels of price and output : Customers to Live Theaters, Inc. can be divided into two groups: seniors and everyone else. The inverse demand curves for each of the two groups are given below. The marginal cost (which equals the average variable cost) of serving an additional p..
State the compound malonate is an analog of succinate : The compound malonate is an analog of succinate and is a strong inhibitor of succinate dehydrogenase. The active site of the enzyme will bind to either molecule, however malonate will not undergo any reaction and gets stuck on the enzyme.
What is the theoretical ex-split price : The current share price is $8.13. What is the theoretical ex-split price? Are the shareholders better off after the split, why or why not?
Explain what temperature might it become spontaneous : From the values of delta H and delta S, predict which of the following reactions would be spontaneous at 25*C:

Reviews

Write a Review

Corporate Finance Questions & Answers

  How the expected return varies with beta

Draw a graph showing how the expected return varies with beta, what is the market risk premium and what is the required rate of return on an investment with a beta of 1.5?

  The stock valuation approach

Stock valuation method uses discounted cash flows theory to compute the theoretical value of a stock. The most popular academic method is dividend growth model.

  Factors affecting value of a stock

Two people agree on the riskiness of a stock, they also agree on expected value of D1 & on expected future dividend growth rate. One person normally holds stocks for two years,

  Covenant requiring a working capital ratio

Jo Company reports the following on Dec 31. 2009, he has a bank loan with a covenant needing a working capital ratio of at least three (3) to one (1).

  Capital structure of the firm based on market values

Which projects would you suggest that Fairfield act upon if no capital rationing and what is the optimal capital budget ANDtaking into consideration the $11 million capital rationing which projects would suggest Fairfield act upon?

  The total cost of ordering and carrying inventory

How many orders will be placed during the year and what will the average inventory be - what is the total cost of ordering and carrying inventory?

  Find the time period for card payment

Helen recently get a credit card with a nominal interest rate of 21%. With the help of card, she buy some new clothes for 250 dollar. The minimum payment on the card is only 20 dollar every month.

  Difference in savings account balances at end of thirty year

Evaluate what is the difference in their savings account balances at the end of thirty years?

  What is the amount to use as the annual sales figure

What is the amount to use as the annual sales figure when evaluating this project- Variable costs are 55 percent of sales, depreciation on the equipment to produce the new board will be $1,350,000 per year, and fixed costs are $1,250,000 ..

  What are the substantive procedures using generalized audit

what are the substantive procedures using generalized audit software to audit.

  Discuss the overall goal of the financial manager

Determine the three forms of business organization, & explain the advantages and disadvantages of each form? For a corporation, discuss the overall goal of the financial manager?

  How would you treat in balance sheet

In December 1988, equipment worth $6700, including a computer priced at $3000, was purchased for cash. William paid an additional $1000 for a computer software package to be used by the company.

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