Suppose that the Treasury bill rate is 6% rather than 2%. Assume that the expect

Question

Suppose that the Treasury bill rate is 6% rather than 2%. Assume that the expected return on the market stays at 10%. Use the following information.

Calculate the expected return from Pfizer. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Find the highest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Find the lowest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Assume that the expected market return stays at 10%. Would Ford offer a higher or lower expected return if the Treasury bill interest rate was 6% rather than 2%?

Stock Beta (?)   Dow Chemical 1.78         Bank of America 1.54         Ford 1.53         Exxon Mobil 0.98         Starbucks 0.95         IBM 0.80         Newmont Mining 0.75         Pfizer 0.66         Walmart 0.42         Heinz 0.40      

Explanation / Answer

a) E(R) = Rf +

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