5.216 according to CAPM
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
the beta is 1 the beta is 1
It would increase the cost of equity: re=rf + b*(RP) re is the cost of equity rf is the risk free rate b is the beta of the stock RP is the risk premium of the stock
Diversifying a portfolio of equity securities across sectors and markets will tend to: 1. a. increase the required risk premium. 2. b. reduce the beta of the portfolio to zero. 3. c. reduce the standard deviation of the portfolio to zero. 4. d. eliminate the market risk. 5. e. reduce the firm-specific risk.
Beta is the measure of a security's volatility compared to the volatility of the market as a whole. Therefore, the market as a whole has a beta of 1.
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
Beta risk arrived through regression technique (regressing stock return and market return) is the key data used to arrive at the cost of equity using CAPM model. The risk premium is calculated using Beta, and risk free return is added to it in order to arrive at cost of equity.
2.0%
No- the market risk premium is the slope of the Security Market Line (SML).
In the world of finance: BETA is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.
the beta is 1 the beta is 1
expected market return = risk free + beta*(market return - risk free) So by putting in values: 20.4 = rf+ 1.6(15-rf) expected market return = risk free + beta*(market return - risk free) So by putting in values: 20.4 = rf+ 1.6(15-rf) where rf = risk free 20.4 - 24 = rf - 1.6rf -3.6 = -0.6rf rf = 6
Unlevered Beta (Asset Beta) is the volatility of returns for a business, without ... In other words, it's a measure of risk and it includes the impact of a company's capital structure ... Finally, you can use this Levered Beta in the cost of equity calculation.
11.84%
It would increase the cost of equity: re=rf + b*(RP) re is the cost of equity rf is the risk free rate b is the beta of the stock RP is the risk premium of the stock
RoR = Rf + beta x Rp where, RoR = Required Rate of return Rf = Risk free Rate Rp = Risk Premium so Ror - 19%
49%....in reality no stock has a beta of 7