What is your best guess as to the actual rate of return

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Reference no: EM133328239

Question: Investors expect the market rate of return in the coming year to be 12%. The T-Bill rate is 4%. Coco Industries stock has a beta of .5. The market value of its equity is $100 million.

If the market rate of return turns out to be 10%, what is your best guess as to the actual rate of return on Coco Industries Stock?

Suppose Coco Industries wins a major lawsuit during the year with a $5 million lawsuit. As a result, its actual stock return turns out to be 10%. The magnitude of the lawsuit award is the only unexpected firm-specific event during the year. What is your best guess as to the settlement the market expected Bobcat Industries to receive from the lawsuit?

Reference no: EM133328239

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