Chapter 8 Homework – Finance 302
83 through 85, 88 through 812
83 REQUIRED RATE OF RETURN:
Assume that the riskfree 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?
84 EXPECTED AND REQUIRED RATES OF RETURN:
Assume that the riskfree 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?
85 BETA AND REQUIRED RATE OF RETURN:
A stock has a required return of 11%, the riskfree 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 riskfree rate and the beta remain unchanged.
88 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%
89 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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 Spring '11
 lawrence
 Finance, Interest

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