Question based on market risk premium

Assignment Help Finance Basics
Reference no: EM1373085

Suppose that investors have recently become more risk averse, so market risk premium has raised. Also, suppose that the risk free rate and expected inflation have not changed. Which of the following is most likely to occur?

- The required rate of return for an average stock (beta = 1) will increase by an amount equal to the increase in the market risk premium.

- The required rate of return will decline for stocks whose betas are less than 1.0.

- The required rate of return on the market, rM, will not change as a result of these changes.

- The required rate of return for each individual stock in the market will increase by an amount equal to the increase in the market risk premium.

- The required rate of return on a riskless bond will decline

 

Reference no: EM1373085

Questions Cloud

From attendance research conducted at concerts : From attendance research conducted at concerts held by Glacier Symphony throughout the previous two years
Discuss how the two companies are similar : Access the web sites of Ron Jon Surf Shop and Hilo Hattie. Discuss how the two companies are similar and how they're different
Human resource perspective us bureau of labour statistics : Human Resource Perspective - Go to the website of US Bureau of Labour Statistics BLS
Subtle positive or negative sanctions : Give some examples of how you used or how subtle positive or negative sanctions have been used on you to influence your behavior.
Question based on market risk premium : Suppose that the shareholders have recently become more risk averse, so market risk premium has raised. Also, suppose that the risk free rate and expected inflation have not changed.
Ake an executive summary that appears at the beginning : Make an Executive Summary that appears at the beginning of project implementation plan. (I did this) but I need some assist on.
Create an executive summary that appears at the beginning : Create an Executive Summary that appears at the beginning of the project implementation plan
Norm in society or american culture : Identify a norm in our society or American culture. What is normative behavior (folkways, mores, and taboos) and how might culture influence norms?
Estimating required return on stocks : Stock A has a beta of .8, Stock B has a beta of 1, and Stock C has a beta of 1.2. Portfolio P has similar amounts invested in each of three stocks.

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculation of ebit and sensitivity analysis

Calculation of EBIT and Sensitivity analysis and What is the operating cash flow for a sensitivity analysis using total fixed costs

  Toyota capital valuation-justify current market

Justify the current market price of organization's equity, if any, using different capital valuation models-Show calculations that support your findings, including those involving rates of return

  Real estate finance

Discuss various types of derivatives contracts: Options, Futures and Forward Contracts. Discuss various types of government and central bank intervention to impact currency exchange rates.

  Determine the forecasted addition to retained earnings

L. company recently reported the following income statement for 2004. The corporation forecasts that its sales will increase by 8 percent in 2005 and its operating costs will increase in proportion to sales.

  Discuss some examples of systematic risks

A recession is an illustration of systematic risk because it affects the pattern of a number of aspects, Discuss some other examples of systematic risks?

  Determining risk as well as return of a portfolio

Determining risk as well as return of a portfolio and explain how the Selected Realized Returns

  Computation of gain or loss on sale of investments

Computation of gain or loss on sale of investments and Journal entries to record purchase & sale of company's Common & Treasury stocks

  Computation of issue of debt and return on equity

Computation of issue of debt and return on equity thus it expects to use this money and increase sales such that the income before interest and taxes

  Calculate the amount for investment

A financial advisor tells you that you can make your child a millionaire if you just start saving early. You decide to put an equal amount every year into an investment account that earns 8 percent interest per year, beginning on the day your child i..

  Project evaluation

Kinky Copies may buy a high volume copier. The machine cost $100,000 and will be depreciated straight-line over five years to a salvage value of $20,000.

  Tax questions

The tax act passed in 2001 raised the contribution limit on the IRA's from $2,000 to $5,000 by 2008. What impact, if any, would you expect this provision to have on the personal savings?

  Computation of selection of the project

Computation of selection of the project and evaluating two mutually exclusive projects and Costs and cash flows are given in the following table

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