stock has a required return of 12%; the risk-free rate is 3.5%; and the market risk premium is 6%. What is the stock's beta? Round to two decimal places.
If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume the risk-free rate and the beta remain unchanged.
A) If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.
B) If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
C)If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
D)If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium.
E)If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
What will the new stock's required rate of return will be %. Round to two decimal places.
stock has a required return of 12%; the risk-free rate is 3.5%; and the market risk premium is 6%. What is the stock's beta? Round to two decimal places.
If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume the risk-free rate and the beta remain unchanged.
A) If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.
B) If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
C)If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
D)If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium.
E)If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
What will the new stock's required rate of return will be %. Round to two decimal places.
Related questions
Keith holds a portfolio that is invested equally in three stocks (Wd = Wa = Wi = 1/3). Each stock is described in the following table:
| Stock | Beta | Standard Deviation | Expected Return |
| DET | 0.7 | 25% | 8% |
| AIL | 1.0 | 38% | 10% |
| INO | 1.6 | 34% | 13.5% |
An analyst has used market and firm-specific information to make expected return estimates for each stock. The analyst's expected return estimates may or may not equal the stocks' required returns.
The risk-free rate (Rf) is 6% and the market risk premium (Rp) is 4%. Use the following graph with the security market line (SML) to plot each stock's beta and expected return.
A stock is in equilibrium if its required return ___________ its expected return. In general, assume that markets and stocks are in equilibrium (or fairly valued), but sometimes investors have different opinions about a stock's prospects and may think that a stock is out of equilibrium (either undervalued or overvalued). Based on the analyst expected return estimates, stock INO is ___________, stock AIL is equilibrium, and stock DET is _________.
