Purchase Solution

# Beta and Required Return

Not what you're looking for?

Beta and Required Return
The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here.

Realized Return
State of the Market Probability that State Occurs Stock Market Chicago Gear
Stagnant 0.20 -10% -15%
Slow Growth 0.35 10% 15%
Average Growth 0.30 15% 25%
Rapid Growth 0.15 25% 35%

Calculate the expected returns on the stock market and on Chicago Gear stock.
Stock Market
Chicago Gear
What is Chicago Gear's beta?
What is Chicago Gear's required return according to the CAPM?

##### Solution Summary

The solution explains how to calculate the beta and the required return based on data about a company on the stock market. Step by step calculations are given.

##### Solution Preview

Calculate the expected returns on the stock market and on Chicago Gear stock.
Stock Market

rM = Prob1*rM1 + Prob2*rM2 + Prob3*rM3 + Prob4*rM4
= 0.2(-10%) + 0.35(10%) + 0.3(15%) + 0.15(25%) = 9.75%.

Chicago Gear

rCG = Prob1*rCG1 + Prob2*rCG2 + Prob3*rCG3 + ...

##### Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

##### Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

##### Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

##### MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

##### Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.