Shrek Corporation's stock has a required return of 11.00%, the risk-free rate is 3.00%, and the market risk premium is 4.00%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2% (risk-free rate stays the same). What is Shrek's new required return? 16% 15% 13% 14%
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- the risk free rate is 13% and the market risk premium rM rRF is 4% stock A has a beta of 12, and stock B has a beta of 0.8 what is the required rate of return on each stock? assume that investors become less willing to take on risk they become more risk averse, so the market risk premium rises from 4% to 6%. assume that the risk free rate remains constant. what affect will this have on the required rates of return on the two stocks?lory Tech Corporation's stock has a required return of 13.00 %, the risk- free rate is 5.00%, and the market risk premium is 5.00% . Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 100 basis points or 1.00% . What is Glory's new required return? 1 % equals 100 basis points. a. 14.00% b. 14.30 % c. 14.60% d. 15.10% e. 17.40%the risk free rate is 3% and the market premium rM rRF is 4%. stock A has a beta of 1.2, and stock B has a beta of 0.8. what is the required rate of return on each stock? assume that investors become less willing to take risk (i.e, they become more risk averse), so the market risk premium rises from 4% to 6%. Assume that the risk free rate remains constant. what effect will this have on the required rates of return on the two stocks?
- Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm - R;) is 8%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28, then this stock's expected return should be A) 10.53% B) 14.24% 23.15% 6.59%Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm - Rf) is 8%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28, then this stock's expected return should be -- A) 10.53% B) 14.24% 23.15% 6.59%Assume that the risk-free rate of return is 4% and the market risk premium (ie., Rm - Re) is 89%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 128, then this stock's exoected return should be A) 10.53% B) 14.24% 23.15% D) 6.59%
- 11) Suppose that a company has just paid a dividend of $1.50 per share. Dividends are expected to grow at 4% per year forever. The market risk premium is 3% and the risk-free rate is 4%. The variance of the market portfolio is 0.15 and the covariance of the stock with the market portfolio is 0.30. What is the fair price of the stock? A. $22.28 B. $26 C. $34 D. $78The market rate of return is 12.5% and the risk-free rate is 3.5%. What will be the change In a stock's expected rate of return if its beta increases from 1.2 to 1.4? 1.88% 1.80% O18.8% O25.0%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.
- Zacher Co.'s stock has a beta of 0.90, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is the firm's required rate of return? Select the correct answer. a. 8.30% b. 8.60% c. 9.20% d. 8.90% e. 9.50%Porter Plumbing's stock had a required return of 11.00% last year when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? Select the correct answer. a. 13.32% b. 13.42% c. 13.52% d. 13.62% e. 13.72%b) You are given the following information about Stock X and the market: The annual effective risk-frec rate is 5%. The expected return and volatility for Stock X and the market are shown in the table below: Expected Return Volatility Stock X 5% 40% Market 8% 25% The correlation between the returns of stock X and the market is -0.25. Assume the Capital Asset Pricing Model holds. Calculate the required return for Stock X and determine if the investor should invest in Stock X.