Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. suppose the rate of return on short-term governmen

Suppose the rate of return on short-term government securities (perceived to be risk-free) is about...

80.2K

Verified Solution

Question

Finance

image

Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 8%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 13%. According to the capital asset pricing model: a. What is the expected rate of return on the market portfolio? (Round your answer to 2 decimal places.) b. What would be the expected rate of return on a stock with =0 ? (Round your answer to 2 decimal places.) c. Suppose you consider buying a share of stock at $48. The stock is expected to pay $2.5 dividends next year and you expect it to sell then for $50. The stock risk has been evaluated at =.5. Is the stock overpriced or underpriced? Overpriced Underpriced

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

A mixture 0.500 mole of carbon monoxide and 0.400 mole of bromine was placed into a...

Chemistry
Q

Provided below are the pressures in the left atrium, left ventricle, and aorta at a given...

Medical Sciences
Q

Please answer in short and quick a) Dug ABC is an orally administered anti-asthmatic drug, which...

Medical Sciences
Q

Apply psychodynamic theory to such delinquent acts as shoplifting and breaking and entering a house.

Psychology
Q

Determine whether the Law of Sines or the Law of Cosines can be used to...

Geometry
Q

8. Consider the overall effects on Fossil of selling watches on account for $64,000 and...

Accounting
Q

Entries for issuing bonds and amortizing discount by straight-line method Interest is payable semiannually. The...

Accounting
Q

Homework 4, Ch. 5: Calculating Customer Lifetime Value Introduction Customer lifetime...

Accounting
Q

Required information Use the following information for the Problems below. [The following information...

Accounting
Q

Required information [The following information applies to the questions displayed below.) of 3 a University...

Accounting
Q

Exhibit 4. Selected Footnotes from NetSuite Inc.'s Financial Statements Revenue Recognition The Company generates revenue...

Accounting
Q

Final Project Description WDI Data Analysis For your final project, you will perform data...

Finance