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 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. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged.

8-7 PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4 million investment fund. The fund consists of four stocks with the following investments and betas:

If the market's required rate of return is 14% and the risk-free rate is 6%, what is the fund's required rate of return?

8-11 CAPM AND REQUIRED RETURN Calculate the required rate of return for Manning Enterprises assuming that investors expect a 3.5% rate of inflation in the future. The real risk-free rate is 2.5%, and the market risk premium is 6.5%. Manning has a beta of 1.7, and its realized rate of return has averaged 13.5% over the past 5 years.

... a is false because required returns depend on systemic risk of the stocks represented by beta. Since beta are different required return of the two stocks would ...

Important information about Beta and Required Return. The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here. ...

... risk-free rate is 6 percent, what is the fund's required rate of return? ... 4) Construct a scatter diagram showing the relationship between returns on stock ...

Determine the required rate of return for a stock using CAPM. ... Bi (Beta) = 1.5. Ki (Required rate of Return) = 4.6% + (1.5 x 6.4). = 4.6% + 9.6%. = 14.2%. ...

...Required: Set up the SML equation and use it to calculate both stocks' required rates of return, and compare those required returns with the expected returns...

... Dividend yield = Required return growth rate The dividend yield is 3% for both ... b. Market efficiency says that the actual realized returns on all stocks ...

... negative, indicating that its return rises when returns on most ... 7 percent and the expected rate of return on an ... is 11 percent, what are the required rates on ...

... The general idea behind CAPM is that investors need to be ... a risk measure (beta) that compares the returns of the ... Beta of the stock RM = Expected return In this ...