Explore BrainMass

Explore BrainMass

    Price of Securities - Required Rate of Return

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The market has an expected return of 10% and the risk-free rate is 4%.

    Based on the security market line implied by this information, which of the following securities are correctly priced and which are over/underpriced?

    Beta Actual Return

    Stock 1 0.60 7.00%
    Stock 2 1.00 11.00%
    Stock 3 1.30 12.00%
    Stock 4 1.70 19.00%

    I need help with this in Excel.

    © BrainMass Inc. brainmass.com June 3, 2020, 8:09 pm ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/price-securities-required-rate-return-125965

    Solution Preview

    The market has an expected return of 10% and the risk-free rate is 4%.
    Based on the security market line implied by this information,
    which of the following securities are correctly priced and which are over/underpriced?

    Beta ...

    Solution Summary

    The solution explains how to calculate the price of securities and determine if they are correctly priced.

    $2.19

    ADVERTISEMENT