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Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)

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โˆ™ 2009-01-06 18:43:45
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Q: Risk free rate is 5 and the market risk premium is 6 What is the expected return for the overall stock market What is the required rate of return on a stock that has a beta of 1.2?
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Related questions

The market risk premium is measured by?

The market risk premium is measured by the market return less risk-free rate. You can calculate the market risk premium as market risk premium is equal to the expected return of the market minus the risk-free rate.


If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 If the market risk premium increased to 6 percent what would happen to the stocks required rate of return?

If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 If the market risk premium increased to 6 percent what would happen to the stocks required rate of return?


If the market risk premium were to increase everything else beign equal the value of common stock would do what?

Value of the common stock will go down.As market becomes riskier market participants adjust expected risk premium and start to demand higher returns, consequently they begin to sell stocks as they do not satisfy their newly adjusted expected risk premium. As a result stock price goes down.


If beta is 1.8 risk free rate is 5 and expected market risk premium is 12 what is the cost of equity?

5.216 according to CAPM


If the risk free rate is 10 percent and the market risk premium is 5 percent market determined beta is 1.8 what is the required rate of return?

RoR = Rf + beta x Rp where, RoR = Required Rate of return Rf = Risk free Rate Rp = Risk Premium so Ror - 19%


Expected return for an asset equals its required return?

This should be correct in a perfect market. Not true usually as assets are often mis priced. Expected return is the return/discount that market is using to get the value of the asset while required return is the discount / return that gets you the true intrinsic value of an asset


What is the current market risk premium?

Banks are currently using 8% market risk premium. Data as of Feb, 2013.


If beta coefficient is 1.4 and the risk free rate is 4.25 and the market risk premium is 5.50 what is the required rate of return?

Require Rate of Return is formulated as: Riskfree Rate + Beta(Risk Premium) Required Rate of Return = 4.25 + 1.4 (5.50) = 11.95%


What is the market cap for Dow 30 Premium DPD?

As of July 2014, the market cap for Dow 30 Premium (DPD) is $194,882,216.61.


What is the market cap for Dow 30 Premium DPO?

As of July 2014, the market cap for Dow 30 Premium (DPO) is $385,818,522.05.


What will happen to the expected return on a stock with a beta of 1.5 and a market risk premium of 9 percent if the Treasury bill yield increases from 3 percent to 5 percent?

2.0%


If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 what is the beta coefficient?

the beta is 1 the beta is 1

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