Solution Assume that the risk free rate of interest is and the expected rate of return on the market is A stock

Solution Assume that the risk free rate of interest is and the expected rate of return

free rate of interest is and the expected rate of return on the market is A stock has an expected rate of return of

Solution Assume that the risk free rate of interest is and the expected rate

of return on the market is A stock has an expected rate of return of

Solution Assume that the risk free rate of interest is and

Solution Assume that the risk

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I need help with this assignment. Most of them are multiple choice questions.1 Assume that the risk-free rate of interest is 3% and the expected rate of return on the market is 15%. A stock has an expected rate of return of 8
Beta
2
Suppose the rate of return on short-term government securiTes (perceived to be risk-free) is about 6%. Suppose also that the expected rate of r
a.
What is the expected rate of return on the market por±olio? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Expected rate of return %
b.
What would be the expected rate of return on a stock with ? = 0? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Expected rate of return %
c.
Suppose you consider buying a share of stock at $46. ²he stock is expected to pay $2 dividends next year and you expect it to sell then for $48.
3
Here are data on two companies. ²he ²-bill rate is 4% and the market risk premium is 6%.
Company
$1 Discount Store
Everything $5
Forecasted return
12%
11%
Standard deviaTon of r
8%
10%
Beta
1.5
1
What would be the fair return for each company, according to the capital asset pricing model (CAPM)? (Do not round intermediate calculaTons
Company
Expected Return
$1 Discount Store
%
Everything $5
%
4 Kaskin, Inc., stock has a beta of 1.2 and Quinn, Inc., stock has a beta of .6. Which of the following statements is most accurate?
²he expected rate of return will be higher for the stock of Kaskin, Inc., than that of Quinn, Inc.
²he stock of Quinn, Inc., has more systemaTc risk than that of Kaskin, Inc.
²he stock of Kaskin, Inc., has more total risk than Quinn, Inc.
5 Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. A share of stock sells for $50 today. It will p
Expected stock price
$
6 ²he market por±olio has a beta of
0
1
-1
0.5.
7 ²he risk-free rate and the expected market rate of return are 0.06 and 0.12, respecTvely. According to the capital asset pricing model (CAPM), th
0.06.
0.144.
0.12.
0.132.
0.18.
8 Which statement is not true regarding the market por±olio?
It includes all publicly traded ³nancial assets.
It lies on the e´cient fronTer.
All securiTes in the market por±olio are held in proporTon to their market values.
It is the tangency point between the capital market line and the indiµerence curve.
All of the opTons are true.
9 Which statement is not true regarding the capital market line (CML)?
²he CML is the line from the risk-free rate through the market por±olio.
²he CML is the best a¶ainable capital allocaTon line.
²he CML is also called the security market line.
²he CML always has a posiTve slope.
²he risk measure for the CML is standard deviaTon.
10 According to the Capital Asset Pricing Model (CAPM), the expected rate of return on any security is equal to
Rf + ? [E(RM)].
Rf + ? [E(RM) - Rf].
? [E(RM) - Rf].

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