View the step-by-step solution to:

8-1 Expected return A stock's returns have the following distribution: Demand for the If This Company's Production Occurs Probability of this Rate of...

This question was answered on Jan 28, 2013. View the Answer
8-1 Expected return A stock’s returns have the following distribution:
Demand for the Probability of this Rate of Return If This
Company’s Production Demand Occurring Demand Occurs
Weak 0.1 (50%)
Below average 0.2 (5)
Average 0.4 16
Above average 0.2 25
Strong 0.1 60
1.0
Calculate the stock’s expected return, standard deviation, and coefficient of variation.


8-3 Required rate of return Assume that the risk-free rate is 6 percent and the expected return on the market is 13 percent. What is the required rate of return on a stock with a beta of 0.7?



8-5 Beta and required rate of return A stock has a required return of 11 percent; the risk-free rate is 7 percent; and the market risk premium is 4 percent.
A) What is the stock’s beta?


B) If the market risk premium increased to 6 percent, what would happen to the stock’s required rate of return? Assume the risk-free rate and beta remain unchanged.

8-7 Portfolio required return Suppose you are the money manager of a $4 million investment fund. The fund consists of 4 stocks with the following investments and betas:
Stock Investment Beta
A $400,000 1.50
B 600,000 (0.50)
C 1,000,000 1.25
D 2,000,000 0.75

If the market’s required rate of return is 14 percent and the risk-free rate is 6 percent, what is the fund’s required rate of return?


9-1 It is frequently stated that the one purpose of the preemptive right is to allow individuals to maintain their share of ownership and control of a corporation.

A) How important do you suppose control is for the average stockholder of a firm whose shares are traded on the New York Stock Exchange?

B) Is the control issue likely to be of more importance to stockholders of publicly owned or closely held (private) firms? Explain.



9-3 If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital gain. Would the distribution between the dividends yield and the capital gain yield be influenced by the firm’s decision to pay more dividends rather than to retain and reinvest more of its earnings? Explain.


9-9 Preferred stock return Bruner Aeronautics has perpetual stock outstanding with a par value of $100. The stock pays quarterly dividend of $2, and its current price is $80.

A) What is its nominal annual rate of return?


B) What is its effective annual rate of return?
8-1 Expected return A stock’s returns have the following distribution: Demand for the Probability of this Rate of Return If This Company’s Production Demand Occurring Demand Occurs Weak 0.1 (50%) Below average 0.2 (5) Average 0.4 16 Above average 0.2 25 Strong 0.1 60 1.0 Calculate the stock’s expected return, standard deviation, and coefficient of variation. 8-3 Required rate of return Assume that the risk-free rate is 6 percent and the expected return on the market is 13 percent. What is the required rate of return on a stock with a beta of 0.7? 8-5 Beta and required rate of return A stock has a required return of 11 percent; the risk-free rate is 7 percent; and the market risk premium is 4 percent. A) What is the stock’s beta? B) If the market risk premium increased to 6 percent, what would happen to the stock’s required rate of return? Assume the risk-free rate and beta remain unchanged.
Background image of page 1
8-7 Portfolio required return Suppose you are the money manager of a $4 million investment fund. The fund consists of 4 stocks with the following investments and betas: Stock Investment Beta A $400,000 1.50 B 600,000 (0.50) C 1,000,000 1.25 D 2,000,000 0.75 If the market’s required rate of return is 14 percent and the risk-free rate is 6 percent, what is the fund’s required rate of return? 9-1 It is frequently stated that the one purpose of the preemptive right is to allow individuals to maintain their share of ownership and control of a corporation. A) How important do you suppose control is for the average stockholder of a firm whose shares are traded on the New York Stock Exchange? B) Is the control issue likely to be of more importance to stockholders of publicly owned or closely held (private) firms? Explain. 9-3 If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital gain. Would the distribution between the dividends yield and the capital gain yield be influenced by the firm’s decision to pay more dividends rather than to retain and reinvest more of its earnings? Explain.
Background image of page 2
Show entire document
Sign up to view the entire interaction

Top Answer

Sorry for the... View the full answer

8424456.doc

8-1 Expected return A stock’s returns have the following distribution:
Demand for the Probability of this Rate of Return If This Company’s Production Demand Occurring Demand Occurs Weak 0.1...

This question was asked on Jan 26, 2013 and answered on Jan 28, 2013.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors and customizable flashcards—available anywhere, anytime.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access or to earn money with our Marketplace.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
  • -

    Flashcards

    Browse existing sets or create your own using our digital flashcard system. A simple yet effective studying tool to help you earn the grade that you want!

    Browse Flashcards