Computation of return on stock using capm approach1nbspparr

Assignment Help Corporate Finance

Reference no: EM13356938

Computation of return on stock using CAPM approach.

1. Parr Paper's stock has a beta of 1.40, and its required return is 13.00%. Clover Dairy's stock has a beta of 0.80. If the risk-free rate is 4.00%, what is the required rate of return on Clover's stock? (Hint: First find the market risk premium.)

a. 8.55%

b. 8.71%

c. 8.99%

d. 9.14%

e. 9.33%

2. Stock A has a beta of 0.8 and Stock B has a beta of 1.2. Fifty percent of Portfolio P is invested in Stock A and fifty percent is invested in Stock B. If the market risk premium (rM Ã¯â‚¬Â rRF) were to increase but the risk-free rate (rRF) remained constant, which of the following would occur?

a. The required return will decrease by the same amount for both Stock A and Stock B.

b. The required return will increase for both stocks but the increase will be greater for Stock B than for Stock A. 2

c. The required return will increase for Stock A but will decrease for Stock B.

d. The required return will increase for Stock B but will decrease for Stock A.

e. The required return on Portfolio P will remain unchanged.

3. Other things held constant, if the expected inflation rate decreases and investors also become more risk averse, the Security Market Line would shift

a. down and have a less steep slope.

b. up and have a less steep slope.

c. up and keep the same slope.

d. down and keep the same slope.

e. down and have a steeper slope.

Reference no: EM13356938

Questions Cloud

Calculation of issue value of bond considering time value : calculation of issue value of bond considering time value of money.wilson company will issue 300000000 of 7 1000 par

Calculation of amount required in retirement considering : calculation of amount required in retirement considering time value.you are 40 years old and plan to retire in exactly

Calculation of annual payment considering time value of : calculation of annual payment considering time value of money.determine the amount of each payment to be made to a

Tvm calculationsyou are 40 years old and plan to retire in : tvm calculationsyou are 40 years old and plan to retire in exactly 20 years. starting 21 years from now you will need

Computation of return on stock using capm approach1nbspparr : computation of return on stock using capm approach.1.nbspparr papers stock has a beta of 1.40 and its required return

Valuation of stock using capmcargo point inc has a beta of : valuation of stock using capm.cargo point inc. has a beta of 1.10. the risk-free rate of interest is currently 6 and

Calculation of required rate of return and valuation of : calculation of required rate of return and valuation of current stock price.the zumwalt company is expected to pay a

Calculation of equilibrium expected growth ratemcdonnell : calculation of equilibrium expected growth rate.mcdonnell manufacturing is expected to pay a dividend of 1.50 per share

Computation of sustainable growth ratethe stieben company : computation of sustainable growth rate.the stieben company has determined that the following will be true next year t

User Account

All Pages