Suppose that the Treasury bill rate were 6% rather than 4%. Assume that the expected return on the market stays at 10%. Use the betas in Table 8.2 . a. Calculate the expected return from Dell. b. Find the highest expected return that is offered by one of these stocks. c. Find the lowest expected return that is offered by one of these stocks. d. Would Ford offer a higher or lower expected return if the interest rate were 6% rather than 4%? Assume that the expected market return stays at 10%. e. Would Exxon Mobil offer a higher or lower expected return if the interest rate were 8%?
Stock Beta Expected Return [ rf + beta ( rm rf)]

Amazon 2.16 15.4
Ford 1.75 12.6
Dell 1.41 10.2
Starbucks 1.16 8.4
Boeing 1.14 8.3
Disney .96 7.0
Newmont .63 4.7
Exxon Mobil .55 4.2
J. & Johnson .50 3.8
Campbell Soup .30 2.4

Solution Preview

Expected Rate of Return
Suppose that the Treasury bill rate were 6% rather than 4%. Assume that the expected return on the market stays at 10%. Use the betas in Table 8.2.
a. Calculate the expected return from Dell.
b. Find the highest expected return that is offered by one of these stocks.
c. Find the lowest expected return that is offered by one of these stocks.
d. Would Ford offer a higher or lower expected return if the interest rate were 6% rather than 4%? Assume that the expected market return stays at 10%.
e. Would Exxon Mobil offer a higher or lower expected return if the interest rate were 8%?

... who is interested in a required rate of return... portfolio recommendation backed by risk-return calculations ... Part I Determine the expected returns and beta for a ...

... by 30 percent while the risk-free rate remained unchanged ... The firm expects to earn $600 in after-tax ... last dividend was D0 = $2.20, and its expected growth rate...

... Please check the attached Excel file for format and formulas **. 1) Expected rate of return on stockholders' equity. ... 1) Expected rate of return on stockh. ...

... What is your rate of return on this investment ... of $1.20 exactly 4 years ago and you expect that next ... Your analyst tells you the stock's expected total return is ...

... The real risk-free rate is r* = 3.0%, the ... into consideration the capital gains investors expect to earn on ... Two firms with the same expected dividend and growth ...

... In addition, you read in Fortune that the expected rate of inflation is 5 percent and the estimated long-term ... What interest rate would you expect on US ...

...Expect. ... Calculate the standard deviation of expected portfolio returns, skp, over the 8 year ... Case Amount of Annuity Interest Rate Period / Years A $14,000 9% 3 ...

... a standard deviation of 8%. The correlation of returns between the ... remaining in stock D, then what is the expected return of the ... SML and Required Rate of Return...