Same reward-to-risk ratio as stock

Assignment Help Financial Management
Reference no: EM131056173

Stock A has a beta of 0.5 and has the same reward-to-risk ratio as stock B. Stock B has a beta of 1.3 and an expected return of 18.5%. What is the expected return on stock A if the risk-free rate is 8%? a. 12.04% b. 10.38% c. 16.26% d. 18.47%

Reference no: EM131056173

Questions Cloud

What is the equivalent present value today-proposed schedule : You are loaning a car to someone who will pay in an unusual schedule as follows: He takes home the car today. No payments are required until the end of the fifth month, when he pays $680. Draw the cash flow diagram to show what is the equivalent pres..
CAPM has implications for expected returns and correlations : If CAPM is valid, which of the following situations are possible? Explain. Consider each situation independently. Hint: recall that the CAPM has implications for expected returns, correlations, covariances and variances.
What is the equivalent present value : He takes home the car today. No payments are required until the end of the fifth month, when he pays $680. Payments of $680 are then due every month until (and including) the end of month 13. What is the equivalent present value today of all payments..
Historical record for the period : The historical record for the period 1926-2013 supports which one of the following statements? Increased long-run potential returns are obtained by lowering risks. A higher-risk security should provide a higher rate of return next year than will a lo..
Same reward-to-risk ratio as stock : Stock A has a beta of 0.5 and has the same reward-to-risk ratio as stock B. Stock B has a beta of 1.3 and an expected return of 18.5%. What is the expected return on stock A if the risk-free rate is 8%? a. 12.04% b. 10.38% c. 16.26% d. 18.47%
What is the coupon rate on bonds : Merton Enterprise has bonds with face value of $1,000 on the market making semiannual payments, with 10 years to maturity, and selling for $1,223.47. At this price, the bonds yield 6%. What is the coupon rate on Merton's bonds?
What is the yield to maturity of this bond : DBA Corp. has a bond outstanding that sells for 105% of its $1,000 par value. The bond has a coupon rate of 5.3% paid semiannually and matures in 18 years. What is the yield to maturity of this bond? a. 5.33% b. 2.44% c. 4.88% d. 3.66%
Marginal cost of capital : Marginal Cost of Capital The McGee Corporation finds it is necessary to determine the firm’s Marginal Cost of capital. McGee’s current capital structure calls for 40% debt, 5% preferred stock, and 55% common equity.
What stock price would you consider appropriate : The Perfect Rose Co. has earnings of $2.35 per share. The benchmark PE for the company is 21. What stock price would you consider appropriate?

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the compound average annual growth rate

Bunge paid $3.25 in dividends in the most recent past year, which is the same amount they have paid in the prior two years. Ten years ago, Bunge dividends were $1.50 per share. What is the compound average annual growth rate for Bunge dividends over ..

  Times-interest-earned ratio

AEI Incorporated has $7 billion in assets, and its tax rate is 40%. Its basic earning power (BEP) ratio is 11%, and its return on assets (ROA) is 6%. What is AEI's times-interest-earned (TIE) ratio? Round your answer to two decimal places

  Terms of loan agreement specified four equal annual payment

On January 2, 2014, Jensen Company borrowed $102,000 from Lyon Country Bank. The terms of the loan agreement specified 4 equal annual payments at 6% annual interest. Compute the amount of each of these payments, assuming, they begin on December 31, 2..

  What factors that normally are not relevant for project

What additional factors that normally are not relevant for a purely domestic project deserve consideration in multinational capital budgeting?

  Bond investments with stable dividend paying stocks

With interest rates so low, some investors have considered replacing bond investments with stable dividend paying stocks. First we’ll look at a bond. What discount rate gets you a Present Value close t o the trading price of $106?

  How much output must the firm produce to break even

A firm that has total fixed costs of $3,520 sells its output for $59.95 per unit and has an average variable cost of $64.15. If the firms cost and revenue curves are linear, how much output must the firm produce to break even?

  What is the current value of the companys stock

JJ Industries will pay a regular dividend of $2.50 per share for each of the next four years. At the end of the four years, the company will also pay out a $61 per share liquidating dividend, and the company will cease operations. If the discount rat..

  Compute the present worth and equivalent annual worth

Annual Maintenance Cost starts in year 3 and increases $100 per year Annual Income starts in the year noted and increases at the rate G1 for 5 years, then becomes stable for 3 years and then declines at the rate G2 for 4 years. Compute the present wo..

  What will the value of this stock be four years from now

Wilson's Furniture is experiencing good growth so has decided to commence paying dividends starting next year. The first dividend will be $0.50 a share with annual increases of 4 percent in the dividend amount. The discount rate is 10 percent. What w..

  Save annually to fund his retirement

Jared is looking forward to graduating with his MBA from OSU. He wants to begin saving for retirement and believes he will need $135,000 during his first year in retirement (he assumes a 2% annual inflation rate, so the $135,000 will have about the s..

  What if the opportunity cost of capital

Suburban Hospital has two options in how to purchase some EDP equipment with a list price of $5m. Option one is a 15% reduction in the price of the equipment but the hospital has to pay the full amount at the time of purchase. What if the opportunity..

  Cost to purchase if the desired put option were traded

You would like to be holding a protective put position on the stock of XYZ Co. to lock in a guaranteed minimum value of 240 at year-end. XYZ currently sells for 240. How much would it cost to purchase if the desired put option were traded? What would..

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!

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