User Account

All Pages

Risk-free rate and the equity premium

Assignment Help Finance Basics
Reference no: EM131117727

Stock A has a beta of 1.2 and an expected return of 17%. Stock B has a beta of 0.8 and an expected return of 13%. If the market is at equilibrium, what are the values for the risk-free rate and the Equity Premium, respectively? [HINT: look at the CAPM formulas]

a. 4% and 8%
b. 5% and 8%
c. 4% and 10%
d. 5% and 10%
e. None of the above

Reference no: EM131117727

Questions Cloud

Computing the employees of a company : These are schemes that allow employees of a company to purchase shares of the company under specific conditions usually at a lower price than the market price.
The price of great american landscaping : The price of Great American Landscaping Inc. is now $85. The company pays no dividends. Toby Chysler expects the price four years from now to be $125 a share. Should Toby buy Great American Landscaping if he wants a 15 percent rate of return? Expl..
What was brian net profit on the put option : Assume Brian immediately sold off the Canadian dollars received when the option was exercised. Also assume that there are 50,000 units in a Canadian dollar option. What was Brian’s net profit on the put option?
Should evidence be thrown out : Freeman said he came from bar lost keys so walked home. Davis got freemen home and helped him inside. Davis saw white powder and pipes in living room . Freemen passed out Davis stayed and called backup.
Risk-free rate and the equity premium : Stock A has a beta of 1.2 and an expected return of 17%. Stock B has a beta of 0.8 and an expected return of 13%. If the market is at equilibrium, what are the values for the risk-free rate and the Equity Premium, respectively? [HINT: look at the..
Prepare a cash budget : Give the advantages of using spreadsheets to prepare a Cash Budget.
What was mike''s net profit on the call option : Assume Mike did not obtain Canadian dollars until the option was exercised. Also assume that there are 50,000 units in a Canadian dollar option. What was Mike's net profit on the call option?
What might be the consequences of not involving nurses : Reflect on your own experiences with your organization selecting and implementing new technology. As an end user, do you feel you had any input in the selection or and planning of the new HIT system?
Computing the clean price of the bond : Today, you paid a total of $1,108.16 to purchase a $1,000 bond. The bond has a 6 percent coupon and pays interest semi-annually. The next interest payment is 4 months from today. What is the clean price of this bond?

Reviews

Write a Review

Finance Basics Questions & Answers

  Capacity planning is complicated by the fact

What is the term for a system in which the product being worked on is physically attached to the line and automatically moved to the next station when the cycle time has elapsed

  What is the value of an investment that pays 20000 every

what is the value of an investment that pays 20000 every other year forever if the first payment occurs one year from

  Market risk problems

In theory the decision maker should view market risk as being of primary importance. However, within-firm, or corporate, risk is relevant to a corporation

  Detailed explanation for issue

Mary has been working for a university for almost 25 years and is now approaching retirement. She wants to address several financial issues before her retirement and has asked you to help her resolve the situations below. Her assignment to you is ..

  Interest rate differential

Assume interest rate differential in dollar and Swiss francs is 4 percent per annum-What actions would you take to profit from the above condition provided that you can borrow SF 1,000,000.00 or its dollar equivalent?

  What rate of return will be realize per quarter and per year

If the bond dividend is in fact paid for the following 5 years (after the 2 years) and the investor then sells the bond for $7000, what rate of return will be realized ( a ) per quarter and ( b ) per year (nominal)?

  The companys dividends are expected to grow at a constant

ti paid a dividend of 5.25 on its common stock yesterday. the companys dividends are expected to grow at a constant

  What is its forecasted dividend payout ratio

Portland Plastics Inc. has the following data. If it follows the residual dividend model, what is its forecasted dividend payout ratio?

  Financial research report

Financial Research Report

  What is their nominal yield to maturity

A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 4 years at $1,045, and currently sell at a price of $1,088.53.

  Aboriginal peoples-american indian-indian-indigenous peoples

For this paper assignment please follow the instructions below and address the following questions: Why are terms such as Aboriginal peoples, American Indian, Indian, Indigenous Peoples, First Nations and Native American all used to describe the or..

  Knowledgeable and prolific space researchers

Aerotech, an aerospace technology research firm, announced this morning that it has hired the world's most knowledgeable and prolific space researchers. Before today Aerotech's stock had been selling for $100. Assume no other information is receiv..

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd