What would the risk-free rate have to be for the two stocks

Assignment Help Financial Management

Reference no: EM131187956

Stock Y has a beta of 1.5 and an expected return of 17.5 percent. Stock Z has a beta of 0.95 and an expected return of 13 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?

Reference no: EM131187956

Questions Cloud

Net present value of decision to produce chains : A bicycle manufacturer currently produces 357,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.10 a chain. The plant manager believes that it would be cheaper to make ..

What is their equity after five years : The Taylors have purchased a $170,000 house. They made an initial down payment of $30,000 and secured a mortgage with interest charged at the rate of 7%/year on the unpaid balance. Interest computations are made at the end of each month. What is thei..

What should the preferred stock market value be : World Wide Interlink Corp. has decided to undertake a large project. Consequently, there is a need for additional funds. The financial manager plans to issue preferred stock with an annual dividend of $5 per share. The stock will have a par value of ..

What is the value of the preferred stock today : Sacramento Light & Power issued preferred stock in 1998 that had a par value of $85. The preferred stock pays a dividend of 5.75%. Investors require a rate of return of 6.50% today on this stock. What is the value of the preferred stock today?

What would the risk-free rate have to be for the two stocks : Stock Y has a beta of 1.5 and an expected return of 17.5 percent. Stock Z has a beta of 0.95 and an expected return of 13 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?

What is the most you would pay for share of stock : ABC, Inc. just paid a dividend of $2. ABC expects dividends to grow at 10%. The return on stocks like ABC, Inc. is typically around 12%. What is the most you would pay for a share of ABC stock? Home Depot stock is currently selling for $75 per share...

Prepares gaap consolidated financial statements : Lanca Corp, based in the US, prepares US GAAP consolidated financial statements. The company has asked you to determine the adjustments needed to convert the 2015 US GAAP financial statements to a set of IFRS financial statements.

Calculate the NPV of this investment : Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12 million. This investment will consist of $2 million for land and $10.10 million for trucks and o..

Decided to bid for a contract to supply shovels : Merton Shovel Corporation has decided to bid for a contract to supply shovels to the Honduran Army. The Honduran Army intends to buy 1,400 shovels per year for the next 3 years. To supply these shovels, Merton will have to acquire manufacturing equip..

User Account

All Pages