Suppose the rate of return on short-term government securities (perceived to be risk-free) is 5%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. According to the CAPM
1. What is the expected rate of return on the market portfolio?
2. Suppose you consider buyi
A. Compute a fair rate of return for Intel common stock, which has a 1.2 beta. The risk-free rate is 6 percent, and the market portfolio (New York Stock Exchange stocks) has an expected return of 16 percent.
b. Why is the rate you computed a fair rate?
Please show all calculations, formulas, and details and send it via Word do
See attached file.
8- 1 EXPECTED RETURN
A stock's returns have the following distribution:
Calculate the stock's expected return, standard deviation, and coefficient of variation.
8- 3 REQUIRED RATE OF RETURN
Assume that the risk- free rate is 6% and the expected return on the market is 13%. What is the required
(Beta and required return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here.
a. Calculate the expected returns on the stock market and on Chicago Gear stock.
b. What is Chicago Gear's beta?
c. What is Chicago Gear's required return according to the CAPM?
Which assumptions regarding investor behavior are required by the CAPM?
1. Investors try to maximize their wealth
2. Investors consider only risk when making investments
3. Investors are risk averse
4. Investors adopt a long-term perspective
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 risk premium for the market portfolio.
Which of the three models (dividend growth, CAPM, or APT) is the best one for estimating the required rate of return (or discount rate) of Safeway?
In your paper include discussion of the following issues:
1. Ease of use of these three models
2. Accuracy of each of these three models
3. How realistic the assumptions of e