You are holding a stock that has a beta of 1.86 and is currently in equilibrium. The required return on the stock is 13.01%, and the return on the market portfolio is 10.20%. What would be the new required return on the stock if the return on the market increased to 14.00% while the risk-free rate and beta remained unchanged? 15.99% 32.97% 13.01% 27.54% 20.08%

You are holding a stock that has a beta of 1.86 and is currently in equilibrium. The required return on the stock is 13.01%, and the return on the market portfolio is 10.20%. What would be the new required return on the stock if the return on the market increased to 14.00% while the risk-free rate and beta remained unchanged? 15.99% 32.97% 13.01% 27.54% 20.08%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

See similar textbooks

Similar questions

Now assume that the stock is currently selling at $30.29. What is its expected rate of return?
An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate, g, throughout time. The stock’s required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL?
Assume that the risk-free rate is 7.5% and the market risk premium is 3%. What is the required return for the overall stock market? Round your answer to one decimal place. _________ % What is the required rate of return on a stock with a beta of 1.8? Round your answer to one decimal place. _____________ %
A stock has a required return of 15%; the risk- free rate is 2.5%, and the market risk premium is 5%. a. What is the stock's beta? b. If the market risk premium increased to 10%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged.
← You are thinking of buying a stock priced at $109.31 per share. Assume that the risk-free rate is about 4.03% and the market risk premium is 6.48%. If you think the stock will rise to $118.76 per share by the end of the year, at which time it will pay a $3.48 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is (Round to two decimal places.) ...
A) What expected return should an investor expect from investments in common stock? You are given the following information: Risk free rate of return = 4%; market risk premium = 11%; Beta of the stock (assume CAPM holds) = 0.72. B) Stock A with beta of 0.8 offers a 11% return while stock B with a beta of 1.2 offers a 15% return. What is the risk-free rate? What is the common market return? Assume CAPM holds.
A stock you are holding has a beta of 2.0 and the stock is currently in equilibrium. The required rate of return on the stock is 15% versus a required return on an average stock of 10%. Now the required return on an average stock increases by 30.0% (not percentage points). The risk-free rate is unchanged. By what percentage (not percentage points) would the required return on your stock increase as a result of this event? Please explain your answer and show your calculations.
Stock A's stock has a beta of 1.30, and its required return is 10.25%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Select the correct answer. a. 8.07% b. 8.19% c. 8.13% d. 8.25% e. 8.31%
Question: A stock has an expected return of 9.7 percent, its beta is .89, and the risk-free rate is 2.9 percent. What must the expected return on the market be?
A stock's beta equals 1.34. If the risk-free rate is 1.3% and the market risk premium is 5.9%, what return should be required on this stock if the CAPM model holds? O 8.41% O 9.21% O 7.48% O 10.04% Onone of these