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Beta and Required Return of a Project

Expected Rate of Return on Stock

You expect the risk-free rate (RFR) to be 5 percent and the market return to be 12.2 percent. You also have the following information about three stocks Current Expected Expected Stock Beta Price Price Dividend X 1 26 26 0.75 Y 2 41.5 44 1.50 Z 2 50.00 58 0.95 What are the expected (required) r

Expected return / beta

17. The expected return on the market is 13% and the risk-free rate is 5%. Your portfolio has a beta of 1.3. What is the expected return on your portfolio? 18. What is the beta of the following portfolio? 40% Stock A Beta = 1.2 30% Stock B Beta = 1 30% Stock C Beta = 0.9 19. The more __________

Return, Standard Deviation, Coefficient Of Variation, Beta

The market portfolio is assumed to be composed of two securities, investment X and investment Y. Determine based on the information given the average return, standard deviation and coefficient variation. Which is the better investment? Year Return X Return Y 1997 16.5% 17.5% 1998

Financial Assets

1. The Carter Company's bonds mature in 10 years have a par value of $1,000 and an annual coupon payment of $80. The market interest rate for the bonds is 9%. What is the price of these bonds? a. $935.82 b. $941.51 c. $958.15 d. $964.41 e. $979.53 2. Bauer Inc's bonds currently sell for $1,275 and have a par value of

Calculate the portfolio's expected return and standard deviation if Andy invests 20% in stock A, 50% in stock B, and 30% in stock C. Assume that each security's return is completely uncorrelated with the returns of the other securities.

Andy Castaneda owns 3 stocks and has estimated the following joint probability distribution of returns: Outcome Stock A Stock B Stock C Probability 1 -10 10 0 0.30 2 0 10 10 0.20 3 10 5 15 0.30 4 20 -10 5 0.20 Calculate the portfolio's expected return and standard deviation if Andy invests 20% in stock

Capital asset pricing

A steel comapny is the using the capital asset pricing model to evaluate a possible investment project. The proposed project involves an investment of 15.2 million to start uo a toy manufacturing plant. the proposed project has about the same risk as the maerket(beta=1) and a project return of 30 percent. Additionally, the pr

What is the alpha of the stock?

Security A has an expected rate of return of 0.10 and a beta of 1.1. The market expected rate of return is 0.08 and the risk-free rate is 0.05. What is the alpha of the stock?

Should you buy this stock or short sell it?

The risk-free rate is 7 percent. The expected market rate of return is 15 percent. If you expect stock X with a beta of 1.3 to offer a rate of return of 12 percent, should you buy this stock or short sell it? Why?

Depreciation tax-shield, portfolio beta,preference dividend

A. For a profitable firm in the 35% marginal tax bracket with $100,000 of annual depreciation expense, what would the depreciation tax shield be? B. What dividend is paid on preferred stock if investors require a 9% rate of return and the stock has a market value of 54% per share and a book value of $50.00 per share? C. W

Calculating covariance, and beta

Hi, I need some help calculating covariance b/w 5 investments and market to obtain beta. Please see directions and attached spreadsheet. --- COULD SOMEONE SHOW ME HOW TO CALCULATE THE COVARIANCE AND BETA FOR THE DATA ON THE ATTACHED SPREADSHEET. A CHECK POINT TO MAKE SURE WE ARE ON THE SAME PAGE IS THAT THE 10-YR BETA FOR

Given a required return of 15%, what should the stock sell for today

Biogenetics, Inc. plans to retain and reinvest all of their earnings for the next 30 years. Investors believe that in the beginning of year 31, the firm will begin to pay a dividend of $12.00 per share. The dividend is expected to remain at the same level thereafter. Given a required return of 15%, what should the stock sell

Rate of return

Thank you for your assistance on the following hypothetical example. Suppose you have invested $30,000 in the following four stocks: Security Amount Invested Beta Stock A $5,000 0.75 Stock B $10,000 1.1 Stock C $8,000

Stock Problems

Hi, THese are pretty basic problems just need some guidance! Thanks! 1. Assume that company A has a beta coefficient of 1.2, that the risk free rate is 7.0 % and that the market risk premium is 5 percent. What is the required rate of return on the firm's stock? 2. Assume that company A is a constant growth company wh

Required rate of return on stocks and equilibrium price

Please help with the following problems. The beta coefficient for stock C is bC= .4, whereas that for stock D is bD= -.5. Stock D has a negative indicating that its rate of return rises whenever returns on most other stocks fall. 1. If the risk free rate is 9 percent and the expected rate of return on an average stock

Stocks' required rates of return are shown.

If MSFT's next years dividend is expected to be 4.00 and the growth rate of the dividend is expected to be 14% forever, then what is the required rate of return for the stock given if it is currently trading at $30 a share.

Evaluating projects: market risk and decision making

BACKGROUND: Ponza International has three divisions. One is engaged is leisure wear, one in graphics, and one in household paint. The company has identified proxy companies in these lines of business whose stocks are publicly traded. Neither Ponza International nor the proxy companies employ debt in their capital structures

Opinion required

Briefly describe Sears, Roebuck and Co. Give three examples of responsibility centers for Sears, Roebuck and Co.. Describe how these responsibility centers interact.

Return types are noted.

An investment of $20 in Stock A is expected to pay no dividends and have value of $24 in 1 year. An investment of $70 in Stock B is expected to generate a $2.50 dividend next year and price of its stock is expected to be $78. 1) What are the expected returns 2) If the required return is 10%, which stock(s) should be profit

SML Fund: required rate of return; should new stock be purchased?

An investment fund has total capital of $500 million invested in 5 stocks: STOCK INVESTMENT STOCK'S BETA COEFFICIENT A $60 million 0.5 B $120 million 2.0 C $80 million 4.0 D $80 million 1.0 E $60 million 3.0 The beta coefficient for the fund can be found as a we

Estimate expected returns and find the beta and the return on the fund.

Estimate expected returns and find the beta and the return on the fund. 1. You use a factor model to estimate expected returns on Daemon stock. The risk-free rate is 3%. You have the following information: Factor Factor Beta Risk Premium GNP .80 .49% Inflation 1.20 -.83% Market .45 6.36% 2. Honest Dave's Used Mu