Suppose that the Kat Corporation over the past five years has had an average annual return of 7%. During that same period, the average annualreturn for the stock market was 3% and the average annual return on U.S. Treasury bills was 1%. The beta of Kat Corporation is estimated to be 2.What was Kat Corporation's excess return over the five-year period?O 3%O 4%O 5%O 6%

The market risk premium is the excess return received for the excess risk undertaken. The beta…

Answered: Suppose that the Kat Corporation over…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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2. Suppose that the rate of return for a particular stock during the past two years was 10% and 20%. Compute the geometric rate of return per year. (Note: A rate of return of 10% is recorded as 0.10, and a rate of return of 20% is recorded as 0.20.) (30%)
Suppose Kaspi Bank is trading share at 25$ today. The company pays dividend of 0.25. The analysts claimed that in one year, target price will be 32$. What is the expected return?
Suppose that a company's most recent dividends per share paid upon the last year's net income was $1.6 . The share price of the company is fairly valued in the market at $10 . The expected dividend growth rate is 2% in perpetuity. Given that the risk-free rate is 3% and market risk premium is 10%, what happens to the share prices when the whole market increases by 10%? a) increase by 15.32%b) increase by 15.00%c) increase by 11.79%d) increase by 21.89%e) other
16) Suppose Bank is trading share at 17$ today. The company pays dividend of 0.25. The analysts claimed that in one year, target price will be 32$. What is the expected return?
You are reviewing a five-year monthly return regression of returns for Jamesway Corp, a U.S.-based consumer product company, against the S&P 500. 0.8 ReturnJamesway = 0.25% + 0.80*ReturnS&P 500 (R2 = 25%). The U.S. treasury bond rate is currently 4.75%, the treasury bill rate today is 4.25% and the historical equity risk premium is 4.91%. b. Based upon this regression, estimate the long-term cost of equity in $ currency terms for this company. a. 9.66% b. 7.48% c. 8.68% d. 10.25%
The following information is provided: • average annual rate of return for common stocks is 8.0%, • average annual rate of return for corporate bonds is 5.0%, the average annual rate of return for U.S. Treasury bills is 3.0%, • average GDP growth is 2% What is the average market risk premium? O 5.0% O 13% O 2% O 8% O 6.0%
Please include the excel formula You’ve observed the following returns on Pine Computer’s stock over the past five years: 8 percent, −12 percent, 14 percent, 21 percent, and 16 percent. Suppose the average inflation rate over this period was 3.1 percent and the average T-bill rate over the period was 3.9 percent. What was the average real return on the company’s stock? What was the average nominal risk premium on the company’s stock over this period? Input area: Year Returns 1 8% 2 -12% 3 14% 4 21% 5 16% Average inflation 3.10% Average T-bill rate 3.90% (Use cells A6 to B13 from the given information to complete this question. You must use the built-in Excel function to answer this question. Make sure to use the “sample” Excel formula.)…
If the last dividend paid by Chemical Brothers Inc. was $1.25 and analysts expect these payments to increase 4% per year, what will the stock price be next year if the required return is 15%? Select one: O a. $12.29 O b. $11.82 O c. $31.25 O d. $12.78 O e. $23.11
Assume that over the last several decades, the annual returns on large-company common stocks averaged 12.1 percent, small-company stocks averaged 16.5 percent, long-term government bonds averaged 6 percent, and U.S. T-bills averaged 3.4 percent. What was the average excess return or risk premium earned by long-term government bonds, and small- company stocks respectively? O2.6%: 13.1% 2.6%; 4.4 % 1.8%; 13.3% 1.9%; 5.1%
A bank has invested $100M in an investment whose annual standard deviation is 0.2. Compute the 1% VaR of this position at the daily horizon. Assume there are 252 trading days in a year. Enter your answer as a positive number to the second digit after the decimal point
The current market price of Venus Filters Ltd is Rs.67. The expected dividend after a year is Rs.1.40, and this dividend is expected to grow at a constant rate of 10% p.a. What is the required rate of return for shareholders? a. 12.09% b. 8.12% c. 6.18% d. 0%
Suppose that a stock gave a realized return of 15% over a two-year time period and a 5% return over the third year. The geometric average annual return is: ..... O A. 5.78% В. 8.67% C. 9.83% O D. 11.57%

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