leannaadrian
15.07.2020 •
Business
A stock has an expected return of 11 percent, its beta is 1.20, and the risk-free rate is 4.4 percent. What must the expected return on the market be
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Ответ:
Expected market return = 9.8%
Explanation:
The expected return on the market can be worked out using the Capital Asset Pricing Model.
The capital asset pricing model is a risk-based model. Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk. The magnitude by which a stock is affected by systematic risk is measured by beta.
Under CAPM, Ke= Rf + β(Rm-Rf)
Rf-risk-free rate (treasury bill rate)- 4.4%
β= Beta - 1.20
Rm= Return on market.- ?
Applying this model, we have
11%= 4.4%+ (R-4.4%)×1.20
0.11-0.044= 1.20×(R-0.04)
0.07 = 1.20R-0.048
Collect like terms
0.07+0.048 = 1.2R
Divide both sides by 1.20
R= (0.07+0.048)/1.20
R=9.83%
Expected market return = 9.8%
Ответ:
The advice Bruce G. Smith offers those who are interested in a career in marketing or business is to get involved at work, in your industry, and your community. Also he states to never stop learning about new or better ways to market.
Explanation: