What must be the stocks beta

Assignment Help Financial Management
Reference no: EM131060003

Please show work with equations

A stock is worth $10 today and will pay either $16 with probability 0.4, or $8 with probability 0.6. The risk free rate is 0% and the expected return on the market is 10%. What must be the stock’s beta?

Reference no: EM131060003

Questions Cloud

Relationship between bond value and interest rate changes : Discuss the relationship between bond value and interest rate changes. What effect do interest rate changes have on bond values on the secondary markets? As the maturity date on a bond approaches what happens to the effect, on bond value, of interest..
New product line and requires an initial outlay : A company is considering a 5-year project that opens a new product line and requires an initial outlay of $78,000. The assumed selling price is $93 per unit, and the variable cost is $66 per unit. Fixed costs not including depreciation are $16,000 pe..
What is the cash break-even point : A company is considering a 5-year project that opens a new product line and requires an initial outlay of $78,000. The assumed selling price is $93 per unit, and the variable cost is $66 per unit. Fixed costs not including depreciation are $16,000 pe..
Kinetic energy is stored in the spring : A ball of mass 0.30 kg is fired with velocity 140 m/s into the barrel of a spring gun of mass 2.4 kg initially at rest on a frictionless surface. The ball sticks in the barrel at the point of maximum compression of the spring. No energy is lost to..
What must be the stocks beta : A stock is worth $10 today and will pay either $16 with probability 0.4, or $8 with probability 0.6. The risk free rate is 0% and the expected return on the market is 10%. What must be the stock’s beta?
Determining the ball amplitude : Part A What is the time constant if the ball's amplitude has decreased to 2.00 cm after 37.0 oscillations?
Collateralized mortgage obligation : What is the difference between a simple pass-through mortgage-backed security and a collateralized mortgage obligation (CMO) with a sequential structure?
Ends of the blood vessel : A blood vessel is 23 cm long, and has a radius of 1.1 mm. If blood is flowing through it with a volume flow rate of 5 X10-7 m3/s, what is the difference in the pressures at the two ends of the blood vessel? Do NOT assume there is zero viscosity.
If the spot yield curve is flat : If the spot yield curve is flat, that is, the rate for all maturities are the same, does it mean that the Forward curve will also be flat? Explain the reason for your answer.

Reviews

Write a Review

Financial Management Questions & Answers

  Capital spending possible without selling any new equity

The Readata Corporation practices a residual dividend policy and maintains a capital structure of 60% debt, 40% equity. Net income for the year is $5,000. What is the maximum amount of capital spending possible without selling any new equity? Suppose..

  Explain how to use the security market line to select stocks

Explain how to use the Security Market Line to select stocks. Explain the significance of the risk-free rate and the market risk premium.

  About how the real interest rate will change

The two-year interest rate is 11.2% and the expected annual inflation rate is 5.6%. a. What is the expected real interest rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected real interest rate 5.30 % b-1. I..

  Riparian rights in comparison to prior appropriation

In well-organized and thorough responses, summarize the major economic and property rights issues associated with the following topics:  The case of Kelo vs. New London, Connecticut. Riparian Rights in comparison to Prior Appropriation

  Cost of equity using the dividend growth model method

Laverne Industries stock has a beta of 1.32. The company just paid a dividend of $.82, and the dividends are expected to grow at 5.2 percent. The expected return of the market is 11.7 percent, and Treasury bills are yielding 5.2 percent. The most rec..

  What is the bonds current market price

BOND VALUATION Callaghan Motors' bonds have 13 years remaining to maturity. Interest is paid semi annually, they have a $1,000 par value, the coupon interest rate is 5%, and the yield to maturity is 6%. What is the bond's current market price?

  Express total interest as percent of the principal borrowed

Consider a loan for $8000 for a period of 3 years at 7% interest with payments made annually. Build the amortization schedule for this loan. How much total interest is paid on this loan? Express the total interest as a percent of the principal borrow..

  What are the different types of cash assets

What are the different types of cash assets and the basic objectives for holding each?

  What is the firms break-even point in sales volume

Proper English Tea, Inc. expects to introduce a new line of teapots, but first management wants to determine its break-even point. Proper English Tea’s expected price per unit is $37.08. The company expects to sell 4,018 units. Variable costs per uni..

  Install the equipment necessary to start production

Romo Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $940,000 to install the equipment nec..

  Calculate value of option base on risk-neutral probabilities

Consider a two period binomial model where in each round the stock increases or decreases by 10%. The current stock price is $20 and the risk free rate is 3.33% each period. We first consider a European call option with a strike $20. Calculate the va..

  What are the firms interest tax savings

ABC has EBIT of $571,000, interest expenses of $263,000, and faces a corporate tax rate of 36%. What is ABC's net income? What would ABC's net income be if it didn't have any debt/no interest expense? What are the firm's interest tax savings?

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