Risk free rate and expected market return

Assignment Help Financial Management
Reference no: EM131554741

The risk free rate is 6%, and the expected market return is 15%. A stock with a beta of 1.2 is selling for $25 and will pay a $1 dividend at the end of the year. If the stock is priced at $30 at year end, it is: A. Overpriced, so short it B. Underpriced, so buy it C. Underpriced, so short it D. Overpriced, so buy it E. Fairly priced, so hold it.

Reference no: EM131554741

Questions Cloud

Equity portfolio-how much should you invest at equity : You have $100,000 to invest in an equity portfolio. how much should you invest at Equity C and Equity D, so that your portfolios expected return will be 16%?
Find the arithmetic mean and the standard deviation : Find the arithmetic mean and the standard deviation?
How much in the risk free asset : you create a portfolio equally as risky as the market, how much money should you invest in stock B? How much in the Risk Free Asset?
How does volatility impact the size of the bid-ask spread : How does the size of the bid-ask spread vary according to the time of day? Why? How does volatility impact the size of the bid-ask spread?
Risk free rate and expected market return : The risk free rate is 6%, and the expected market return is 15%.
What are black-scholes prices of the call and the put : What are the Black-Scholes prices of the call and the put? What are the option deltas?
Against dollar during period-what is the total dollar return : If the local currency appreciates by 3% against the dollar during the period, what is the total dollar return?
Reduce pretax operating costs-should we accept the project : Consider a $10,000 machine that will reduce pretax operating costs by $3,000 per year over the next five years. Should we accept the project?
What was your total dollar return : If you bought the stock at $98.50 and sold it at $120, what was your total dollar return, in percent on Toyota stock for the year?

Reviews

Write a Review

Financial Management Questions & Answers

  What is pretax cost of debt and aftertax cost of debt

Jiminy’s Cricket Farm issued a bond with 10 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 95 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wha..

  Call option is currently selling

A call option is currently selling for $4.40. it has a strike price of $50 and five months to maturity. What is the price of a put option with a $50 strike price and five months to maturity? the current is $52, and the interest rate is 4.6 percent.

  What was your total real return on investment

If the inflation rate was 3.1 percent over the past year, what was your total real return on investment?

  Expected life of three years as delivery vehicle

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $20,500 to purchase and which will have OCF of –$2,500 annually throughout the vehicle’s expected life of three years as..

  What is lower bound of an european foreign currency call

What is the lower bound of an European foreign currency call if the spot rate is 2.25 the domestic interest rate is 5.5%

  Company historical average pe as benchmark

Using the company’s historical average PE as a benchmark, what is the target stock price one year from today

  Francis furniture has current fixed costs

Variable operating costs are not expected to change as a result of the lathe purchase. If Francis wishes to leave its breakeven point unchanged, what action must it take?

  Margin account with the exchange clearinghouse

How much does the member have to add to its margin account with the exchange clearinghouse?

  Sales forecast is starting point of budgeting process

Discuss the differences in the reports prepared for upper management compared to the reports prepared for lower-level managers. Why do these differences exist? The sales forecast is often the starting point of the budgeting process. Identify and disc..

  What is the rate of return on his investment

John opens a brokerage account and purchases 300 shares Starbucks at $40 per share. He borrows $4000 from his broker to help pay for the purchase. The interest rate on the loan is 8%. What is the margin in John's account when he first purchases stock..

  Short-term profits at the expense of long term profits

Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long term profits.

  What is minimum expected annual return for stock

In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..

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