Which of the following statements is correct? (Assume that the risk-free rate is a constant)
a. If the market riskpremium increases by 1%, then the required return will increase for stocks that have a beta greater than 1.0.
b. The effect of a change in the market riskpremium depends on the slope of the yield curve.
19. Suppose the market portfolio is equally likely to increase by 30% or decrease by 10%.
a. Calculate the beta of a firm that goes up on average by 43% when the market goes up and goes down by 17% when the market goes down.
b. Calculate the beta of a firm that goes up on average by 18% when the market goes down and goes
CAPM and EXPECTED RETURN: The following table shows betas for several companies. How do I calculate each stock's expected rate of return using the CAPM. Assuming the risk-free rate of interest is 5 percent. Using a 9 percent riskpremium for the market portfolio.
1. You own a stock portfolio invested 25% in stock Q, 20% in stock R, 15% in stock S, and 40% in stock T. The betas for these stocks are .84, 1.17, 1.11, and 1.36 respectively. What is the portfolio beta?
2. (Using CAPM) A stock has a beta of 1.05, the expected return on the market is 11 % and the risk-free rate is 5.2 %.
If I have a company whose beta is .54,the present yield to maturity on U.S. government bonds maturing in one year (currently about 4.5% annually) and an assessment that the market riskpremium is 6.5%, using the CAPM equation,what is the present cost of equity of my company?
If I have 2 companies, A and B, the beta of A is .