Following information is given from the books of Al Hamid Investment Services. The expected market return is to be 6 per cent and the risk free rate of return to be 4 per cent.
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A: The asset required rate of return can be calculated with the help of CAPM equation
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A: Given: Beta = 0.65 Market return = 11%= 0.11 Risk free rate = 4% = 0.04
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A: Information ratio = Return of portfolio-Return of benchmarkTracking errorTracking error = Risk of…
Q: Suppose the current risk-free rate of return is 5 percent and the expected market risk premium is 7…
A: Risk free rate= 5% market risk premium = 7% beta = 2 Market Equity Risk Premium (MRP) = rm − rf…
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A: The minimum return that an investor will accept on investment is called the required rate of return.…
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A: This Question has two parts. In part A we need to calculate Beta and In part B we need to calculate…
Q: Paycheck, Inc. has a beta of 1.19. If the market return is expected to be 13.50 percent and the…
A: Risk Premium: It is the investment return amount assets are expected to yield in excess of the…
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A: Financial statements are statements which states the business activities performed by the company .…
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A: A model that represents the relationship of the required return and beta of a particular asset is…
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A: A model that represents the relationship of the required return and beta of a particular asset is…
Q: Assuming a risk-free rate of 8 percent and a market return of 12 percent, would it be wise for…
A: The fundamental rate of return is calculated by using the CAPM approach. In this approach, the…
Q: Suppose that the returns on an investment are normally distributed with an expected return of 16%…
A: Z score = (Observed value - mean) / standard deviation Z score = (19%-16%) / 3% Z score = 3%/3% Z…
Q: There are two risky assets, debt and equity. The expected return is 8% on the debt and 13% on the…
A: Expected return of debt (Rd) = 8% Expected return of equity (Re) = 13% Standard deviation of debt…
Q: An analyst has modeled the stock of Crisp Trucking using a two-factor APTmodel. The risk-free rate…
A: Factor 1: Risk premium r1p =Expected return of factor 1 - Risk free rate Risk premium r1p = (12% -…
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A: Here, Risk Free rate of Return is 5% Expected Return of Market Portfolio is 15% Standard Deviation…
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A: In the above question we need to calculate the Expected rate of return of stock where, Risk free…
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A: CAPM refers to capital asset pricing model. This model shows the relationship between systematic…
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A: In this we have to use capital assets pricing model.
Q: What is the expected risk-free rate of return if asset X, with a beta of 1.5, has an expected return…
A: The risk free rate of return can be calculated with the help of CAPM equation
Q: The following data have been developed for the Donovan Company: Probability of State of Nature State…
A: (a) State Probability Market Return, Rm RmxPi Return for the Firm, Rj RjxPi 1 0.10 -0.15 -0.015…
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A: A single factor APT can be extended further to contain more number of independent risk factors that…
Q: A researcher has determined that a two-factor model is appropriate to determine the return on a…
A: Risk free rate (Rf) = 11% GNP market return (R1) = 13.5% GNP beta (B1) = 1.2 Interest rate return…
Q: Following information is given from the books of Al Hamid Investment Services. The expected market…
A: To find the required rate using Capital Asset Pricing Model (CAPM), we will use the following…
Q: What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T?…
A: Return of Stock S = (0.25 * 30%) + ( 0.5 * 15% )+ (0.25 * -10%) = 7.5 + 7.5 - 2.5 = 12.5 Return of…
Q: Compute Bowling Avenue Inc.'s required rate of return given a beta of.9, risk free rate of 3.25%,…
A: Calculation of required rate of return:Answer:The required rate of return is 8.425%
Q: Being Finance Manager of Salalah Textiles Industries, you need to invest an amount for OMR 50,000 in…
A: Capital asset pricing model is the model that depicts the relationship between the systematic risk…
Q: Deming Corporation utilizes the capital asset pricing model (CAPM) to estimate the cost of its…
A: Market Rate of Return = 10% Beta = 1 Risk Free Rate = 5%
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A: Expected return: It can be computed by taking the product of the probability of a specific payoff…
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A: IRR = R1 + NPV 1 (R2 - R1) /( NPV 1 - NPV 2) R1 = First Interest rate = 12% R2 = Second Interest…
Q: Security X has an expected rate of return of 13% and a beta of 1.15. The risk-free rate is 5%, and…
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A: Following is the answer to the question
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Q: Conglomco has a beta of 0.32. If the market return is expected to be 12 percent and the risk-free…
A: Following details are given to us in the question : Beta (B) = 0.32 Market Return = 12% Risk free…
Q: Paycheck, Inc. has a beta of 1.02. If the market return is expected to be 16.90 percent and the…
A: Risk Premium: It characterizes to the additional return over the risk free rate that an investor…
Q: Unthank Corp. has a volatility of 15% and a correlation with the market portfolio of 0.5. If the…
A: The expected return of the stock can be calculated with the help of CAPM equation.
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Q: Suppose you are given the following inputs for the Fama-Frech-3-Factor model. Required Return for…
A: Required Return on Stock = ? Risk Free Rate = 8% Beta of Stock = 0.8 Market Risk Premium = 6%…
Q: What is the expected risk-free rate of return if Asset X, with a beta of 1.5, has an expected return…
A: Required return = risk free rate + beta * market retrun - beta* risk free rate
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A: Required return for the project = Risk free rate + ( Market rate of return - Risk free rate ) *…
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A: CAPM evolved as a way to measure this systematic risk. Sharpe found that the return on an individual…
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- Which of the following is a financial instrument? Select one: a. All the options b. Merchant bankers c. Banks d. Mutual Fund e. Leasing Companies Find the profitability index for Oman Clothing Company if the initial investment is 10700 OMR and the cash Inflows are as follows: Year 1 =5350 OMR; Year 2 =6400 OMR; Year 3=7450 OMR and Year 4=8500 OMR. Use discount rate as 5.05%. Select one: a. 2.27 b. 1.15 c. 2.89 d. 1.41 e. None of the optionsHere are data on two companies. The T-bill rate is 5.6% and the market risk premium is 7.1%. $1 Discount Store Everything $5 13% 18% Company Forecast return. Standard deviation of returns Beta Company $1 Discount Store Everything $5 Expected Return 14% 16% Required: What would be the expected rate of return for each company, according to the capital asset pricing model (CAPM)? (Round your answers to 2 decimal places.) % % 1.6 1.0Being Finance Manager of Salalah Textiles Industries, you need to invest an amount for OMR 50,000 in the investment market. Assume the market rate of return is 0.11, risk free rate of return is 2.75% and Beta is .73, then:Required:a) What should be required rate of return for your investment?b) Keeping the answer of question # 2a in mind, if different investment options are available with different returns in the investment market, for example:i. For investment in Project-A, 6.30% return is offered;ii. For investment in Project-B, 10.95% return is offered, andiii. For investment in Project-C, 5.65% return is offered.In above scenario, explain whether any why these investment options are overvalued or undervalued? Keeping the answer of question # 2a and 2b, what will be your investment decision (justify your answer with reasons)
- (Capital Asset Pricing Model) CSB, Inc. has a beta of 0.758. If the expected market return is 10.5 percent and the risk-free rate is 6.5 percent, what is the appropriate expected return of CSB (using the CAPM)? The appropriate expected return of CSB is%. (Round to two decimal places.)Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%. Company $1 Discount Store Everything $5 Forecast return 12% 11% Standard deviation of returns 8% 10% Beta 1.5 1.0 What would be the fair return for $1 Discount Store according to the capital asset pricing model (CAPM)? Enter your answer as a decimal.Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%. Company $1 Discount Store Everything $5 Forecasted return 12% 11% Standard deviation of returns 8% 10% Beta 1.5 1.0 What would be the fair return for each company according to the capital asset pricing model (CAPM)?
- (Capital Asset Pricing Model) The expected return for the general market is 10.5 percent, and the risk premium in the market is 6.8 percent. Tasaco, LBM, and Exxos have betas of 0.809, 0.677, and 0.578, respectively. What are the appropriate expected rates of return for the three securities? Question content area bottom Part 1 The appropriate expected return of Tasaco is enter your response here%. (Round to two decimal places.) Part 2 The appropriate expected return of LBM is enter your response here%. (Round to two decimal places.) Part 3 The appropriate expected return of Exxos is enter your response here%. (Round to two decimal places.)Apex Industries Ltd. (AIL) asked you to find the required rate of return to be used for a new project it is going to take in Information Technology Industry (IT Industry). As part of your assignment you have collected the following information of a company in the IT Industry: Beta of the company’s equity is 1.5; Debt to value ratio of the company is 50%; Market risk premium is 8% (expected return of market portfolio minus risk-free rate), risk-free rate is 6%, The company’s cost of debt is 10% and its corporate tax rate is 30%. AIL wants to finance the project with a debt to value ratio of 40%. It can borrow at 8% interest rate and its corporate tax rate is also 30%. 1. Find out the required rate of return, i.e. RWACC, that AIL wants to use as the discount rate to find out the NPV of the project.…(Capital Asset Pricing Model) Johnson Manufacturing, Inc., is considering several investments. The rate on Treasury bills is currently 7.5 percent, and the expected return for the market is 10.5 percent. What should be the expected rate of return for each investment (using the CAPM)? Security A B C D Beta 1.62 1.02 0.71 1.34 a. The expected rate of return for security A, which has a beta of 1.62, is%. (Round to two decimal places.)
- DraftKings Inc (DKNG) has a capital structure of 29% debt and 71% equity. The expected return on the market is 7.65%, and the risk-free rate is 2.41%. What discount rate should an analyst use to calculate the NPV of a project with an equity beta of 1.22 if the firm’s after-tax cost of debt is 4.26%? A. 3.15% B. 5.18% C. 7.49% D. 9.01%An all-equity firm is considering the projects shown below. The T-bill rate is 4 percent and the market risk premium is 7 percent. Project Expected Return A Project A Project B Project C Project D 8.0% 19.0 13.0 17.0 Calculate the project-specific benchmarks for each project. (Round your answers to 1 decimal place.) O Project C O Project D Beta 0.5 1.2 1.4 % % % % If the firm uses its current WACC of 12 percent to evaluate these projects, which project(s), will be incorrectly accepted? O Project A O Project BUsing Capital Asset Pricing Method (CAPM), compute for the cost of capital (equity) with risk-free rate of 4%, market return of 8% and Beta of 1.75 a. 13.00% b. 12.00% c. 11.00% d. 10.00%