ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Company X has a beta of of 1.45. The expected risk-free rate of interest is 2.5% and the expected return on the market as a whole is 10%. Using the CAPM, what is ABC’s expected return?
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13.3%
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13.375%
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18.75%
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12.25%
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Explanation:
Detailed explanation-1: -Expert Answer We reviewed their content and use your feedback to keep the quality high. 1) Beta = 1.2 Risk free rate = 6% MArket Return = 12% Required Rate of Return for a stock = Beta of Stock x(MArket return-Risk free rate of return) + Risk free rate of return Required…
Detailed explanation-2: -What is the expected return for a stock that has a beta of 1.5, if the risk-free rate is 6% and the market rate of return is 11%? The Answer is 13.5%.
Detailed explanation-3: -Expected return = Risk Free Rate + [Beta x Market Return Premium] Expected return = 2.5% + [1.25 x 7.5%] Expected return = 11.9%
Detailed explanation-4: -The expected return on a portfolio composed of 40% stock A and 60% stock B is 21%.
There is 1 question to complete.