Expected returns and betas

Assignment Help Finance Basics
Reference no: EM1362745

You have been scouring The Wall Street Journal looking for stocks that are "good values" and have calculated the expected returns for five stocks. Assume the risk-free rate (rRF) is 7 percent and the market risk premium (rM - rRF) is 2 percent. Which security would be the best investment? (Assume you must choose just one).

Expected Return Beta
a. 9.01% 1.70
b. 7.06% 0.00
c. 5.04% -0.67
d. 8.74% 0.87
e. 11.50% 2.50

 

Reference no: EM1362745

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Explain capital budgeting decision for purchase of computers

Explain Capital Budgeting decision for purchase of computers based on present value of costs

  Function of the amount of debt

Plot the value of Progressive, with and without the costs of financial distress, as a function of the amount of debt. Why do the lines differ in shape?

  Compute the current price of the company stock

Mack Industries just paid a dividend of $1 each share. Analysts expect the company's dividend to grow 20 percent this year, and 15 percent next year.

  Preparation of a balance sheet with given trial balance

Prepare a balance sheet at December 31, 2007 for John Nalezny Corporation and Ignore income taxes

  Compute the amount at the end of the year

Suppose you have been hired to run a pension fund for TelDet Corporation, a small manufacturing firm. The firm currently has $5 million in the fund and expects to have cash inflows of $2 million a year for 1st 5-years followed by cash outflows of $3 ..

  Dell computers has an outstanding matter of bond

Dell Computers has an outstanding matter of bond with a par value of $1,000, paying 8 percent coupon rate. The bond has 10 yrs to maturity.

  Elements of working capital for 2006 fiscal year

Explain and quantify the elements of working capital for 2006 fiscal year for both the Walt Disney Company and Apple. Explain the functions of intermediaries and financial regulatory bodies within the companies.

  Computation of risk free rate of return

Computation of Risk free rate of return and Suppose that securities A and B are perfectly negatively correlated

  Computing portfolio beta

A stock portfolio invested 35% in Stock Q, 25% in Stock R, 30% in Stock S, and 10% in Stock T. The betas for these 4 stocks are .84, 1.17, 1.11 and 1.36 respectively. Compute the portfolio beta?

  Formulation for an inventory turnover results

Suppose a company has an average inventory of $25,000, sales of $250,000, gross profit of $100,000, and net income of $25,000.

  Calculation of price of preferred stock with given data''s

Calculation of price of preferred stock with given data's and Compute the price of the preferred stock

  True or false question based on investment plan

Senior management of Baldwin meets to estimate their investment plan for the year. They decide to fully fund a plant and machine buy through issuing 50,000 shares of stock plus a new bond issue.

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