What is expected rate of return on the market portfolio

Assignment Help Business Management

Reference no: EM133578572

Questions

1. What is the beta of a portfolio with the expected return of 18%, if the risk-free rate is 6% and the risk premium of market portfolio is 8%?

2. Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. A share of stock sells for $50 today. It will pay a dividend of $6 per share at the end of the year. Its beta is 1.2. What do investors expect the stock to sell for at the end of the year?

3. Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. A stock has an expected rate of return of 4%. What is its beta? Why would anyone consider buying this risky asset which provides an expected return less than the risk-free rate?

4. Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. A stock has an expected rate of return of 4%. What is its beta? Why would anyone consider buying this risky asset which provides an expected return less than the risk-free rate?

(a) What is the expected rate of return on the market portfolio?

(b) What would be the expected rate of return on a stock with b = 0?

(c) Suppose you consider buying a share of stock at $40. The stock is expected to pay $3 dividends next year and you expect it to sell then for $41. The stock risk has been evaluated by b = -0.5. Is the stock overpriced or underpriced?

5. If we regress the stocks' average return on their betas, what should be the slope and the intercept according to the CAPM? 6. If we regress a stock's returns on returns of the market portfolio, what should be the slope according to the CAPM?

Reference no: EM133578572

Questions Cloud

Discuss your ability and comfort level during the session : Discuss your ability and comfort level during the session for attending to your mock student's emotions. Provide at least one example.

Difference between systematic and nonsystematic risk : What is the difference between systematic and nonsystematic risk? What are some examples of each? Give reference.

Explain the persons and the organizations role in tackling : Explain both the person's and the organization's role in tackling those challenges and obstacles. Explain what you have learned.z

What is the annual percentage increase : What is the percentage increase OVER the nine years? What is the annual percentage increase?

What is expected rate of return on the market portfolio : Assume that the risk-free rate of interest is 6% and the expected rate of return on market is 16%. What is the expected rate of return on the market portfolio?

What is its meaning in arabic and in islamic practice : What is its meaning in Arabic and in Islamic practice? How is it used in the Qur'an? How does this meaning compare to the use of the word in the contemporary

How the research helps inform an evidence response : explanation of how the research helps inform an evidence response to the identified problem (1600-1700 words) III. Conclude Part 1 with a short reflection on

How does fairey use the elements of design to create works : How does Fairey use the elements of design to create works that blend art and design? Be sure to discuss a work of his in your response.

Part of the affordable care act : Many states, especially in the south, have decided that coverage of weight-loss surgery will not be required as part of the Affordable Care Act.

User Account

All Pages