What is the required rate of return on the market

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Question -

A. Tom O'Brien has a 2-stock portfolio with a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.90 and the remainder is invested in Stock B with a beta of 1.10. What is his portfolio's beta?

B. Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 3.5%, (4) the firm has a beta of 1.00, and (5) its realized rate of return has averaged 15.0% over the last 5 years.

C. Mulherin's stock has a beta of 1.5, its required return is 12%, and the risk-free rate is 6%. What is the required rate of return on the market?

D. A 12-year bond has an annual coupon rate of 9%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 7%. Which of the following statements is correct?

Reference no: EM132984659

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