ABC Company's stock has a beta of 1.95, the risk-free rate is 2.25%, and the market...

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ABC Company's stock has a beta of 1.95, the risk-free rate is2.25%, and the market risk premium is 6.75%. What is ABC's requiredrate of return using CAPM? Enter your answer rounded to two decimalplaces. Do not enter % in the answer box. For example, if youranswer is 0.12345 or 12.345% then enter as 12.35 in the answer box.Ripken Iron Works believes the following probability distributionexists for its stock. What is the standard deviation of return onthe company's stock? Enter your answer rounded to two decimalplaces. Do not enter % in the answer box. For example, if youranswer is 0.12345 or 12.345% then enter as 12.35 in the answerbox.
State of the Economy Probability of State Occurring Stock'sExpected Return Boom 0.25 35% Normal 0.45 13% Recession 0.30 -26%Joel Foster is the portfolio manager of the Go Anywhere Fund, a $3million hedge fund that contains the following stocks. The requiredrate of return on the market is 8.75% and the risk-free rate is2.50%. What rate of return should investors expect (and require) onthis fund? Enter your answer rounded to two decimal places. Do notenter % in the answer box. For example, if your answer is 0.12345or 12.345% then enter as 12.35 in the answer box.
Stock Amount Beta
A $1,075,000 1.20
B 675,000 1.50
C 750,000 2.55
D 500,000 1.10
$3,000,000
1. Hazel Morrison, a mutual fund manager, has a $60 millionportfolio with a beta of 1.00. The risk-free rate is 3.25%, and themarket risk premium is 6.00%. Hazel expects to receive anadditional $40 million, which she plans to invest in additionalstocks. After investing the additional funds, she wants the fund'srequired and expected return to be 14%. What must the average betaof the new stocks be to achieve the target required rate of return?Enter your answer rounded to two decimal places. For example, ifyour answer is 123.45% or 1.2345 then enter as 1.23 in the answerbox.

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4.0 Ratings (833 Votes)

1 ABC COMPANY Required return using CAPM Risk free rateBetaMarket risk premium 225195675 1541 2 RIPKEN IRON WORKS Economy Probability p Return r Er pr Deviations d rEr d2 pd2 Boom 025 35 875 2820 79524 19881 Normal 045 See Answer

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ABC Company's stock has a beta of 1.95, the risk-free rate is2.25%, and the market risk premium is 6.75%. What is ABC's requiredrate of return using CAPM? Enter your answer rounded to two decimalplaces. Do not enter % in the answer box. For example, if youranswer is 0.12345 or 12.345% then enter as 12.35 in the answer box.Ripken Iron Works believes the following probability distributionexists for its stock. What is the standard deviation of return onthe company's stock? Enter your answer rounded to two decimalplaces. Do not enter % in the answer box. For example, if youranswer is 0.12345 or 12.345% then enter as 12.35 in the answerbox.State of the Economy Probability of State Occurring Stock'sExpected Return Boom 0.25 35% Normal 0.45 13% Recession 0.30 -26%Joel Foster is the portfolio manager of the Go Anywhere Fund, a $3million hedge fund that contains the following stocks. The requiredrate of return on the market is 8.75% and the risk-free rate is2.50%. What rate of return should investors expect (and require) onthis fund? Enter your answer rounded to two decimal places. Do notenter % in the answer box. For example, if your answer is 0.12345or 12.345% then enter as 12.35 in the answer box.Stock Amount BetaA $1,075,000 1.20B 675,000 1.50C 750,000 2.55D 500,000 1.10$3,000,0001. Hazel Morrison, a mutual fund manager, has a $60 millionportfolio with a beta of 1.00. The risk-free rate is 3.25%, and themarket risk premium is 6.00%. Hazel expects to receive anadditional $40 million, which she plans to invest in additionalstocks. After investing the additional funds, she wants the fund'srequired and expected return to be 14%. What must the average betaof the new stocks be to achieve the target required rate of return?Enter your answer rounded to two decimal places. For example, ifyour answer is 123.45% or 1.2345 then enter as 1.23 in the answerbox.