Purchase Solution

Required rate of return

Not what you're looking for?

Ask Custom Question

Assume that the risk-free rate is 5% and the market risk premium is 6%, what is the expected return for the overall stock market? What is the required rate of return that has a beta of 1.2?

Purchase this Solution
Solution Summary

The solution explains how to calculate the required rate of return given the beta

Solution Preview

The return can be calculated using the CAPM equation
Expected return = Rf + (Rm-Rf) ...

Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Basics of corporate finance

These questions will test you on your knowledge of finance.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

View More Free Quizzes
Related BrainMass Solutions

  • Stock questions

    What is the required rate of return on a stock with a beta of 0.7? 8- 5 BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%, the risk- free rate is 7%, and the market risk premium is 4%. a. What is the stock's beta? b.

  • Rate of return, growth rate, return on equity

    rate of return = $2.7016 Required rate of return = .087148 Required rate of return = 8.71 percent b.

  • Required return

    What is the required rate of return on a stock with a beta of 0.7? 8-5 BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%, the risk-free rate is 7%, and the market risk premium is 4%. a. What is the stock's beta? b.

  • Stocks : Required Rate of Return and Expected Return

    235871 Determining Required Rate of Return and Expected Return: Example A stock has a beta of 1.5, the market risk premium is 9%, and the risk-free rate is 5%. a. What is the required rate of return on this stock? b.

  • Required Rate of Return

    89512 Required Rate of Return for Financial Management Suppose the following: Risk Free Rate of Return = 9% Required Rate of Return on a Market Portfolio = 14% Beta = 1.3 Suppose the risk free rate of return (1) increases to 10 percent or

  • Nominal required rate of return

    Hence there is a need of change in nominal required rate of return as the real rate of return will go down if there is increase in inflation with no increase in nominal required rate of return.

  • Cost of Capital with Flotation Costs

    So, Required rate of return=(Next dividend/(Price of stock-flotation cost per share))+growth rate Required rate of return=($1.75/($35-$1.75))+.07 Required rate of return=($1.75/$33.25)+.07 Required rate of return=0.0526+.07 Required rate of return

  • Calculating WACE

    )/(Required rate of return - .06) $52.50 = $2.65/(Required rate of return - .06) ($52.50*Required rate of return) - ($52.50*.06) = $2.65 ($52.50*Required rate of return) - $3.15 = $2.65 ($52.50*Required rate of return) = $5.80 Required rate of return

  • required return

    If the risk free rate rises to 9%, what will the required rate of return on the company's stock? = 9%+1.3*(14%-8%) =16.8% III. If the beta of this company were 0.8, what would the its required rate of return?

  • How to calculate - Rate of Return, CAPM

    112953 How to calculate - Rate of Return, CAPM 1. Required rate of return: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13 percent, and the risk-free rate of return is 7 percent.

View More Related Solutions