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Chapter 8 Homework

# Chapter 8 Homework - Chapter 8 Homework Finance 302 8-3...

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Chapter 8 Homework – Finance 302 8-3 through 8-5, 8-8 through 8-12 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? 8-4 EXPECTED AND REQUIRED RATES OF RETURN: Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the expected return for the overall stock market? What is the required rate of return on a stock with a beta of 1.2? 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. 8-8 BETA COEFFICIENT: Given the following information, determine the beta coefficient for Stock J that is consistent with equilibrium: = 12.25%, r RF = 4.5%, r M = 10.5% 8-9 REQUIRED RATE OF RETURN:

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Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13%, and
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