5. If a stock\'s required or expected rate of return is 22%, its average market

Question

5. If a stock's required or expected rate of return is 22%, its average market return is 18%, and the interest yield on 10-year US Treasury Bonds is 4%, what is the stock's Beta
6. Select any type of company (e.g., your employer or the company for your term project) and set up the equation for calculating the required or expected rate of return using the APT model. Use your own estimates for the weighting of each factor, so that the equation accurately generates a required or expected rate of return that is mathematically correct. [Helpful hint: do not spend too much time or "overthink" this problem as this merely a hypothetical exercise to measure your comprehension on how the APT model can be applied in real world situations.] ALSO you are not called upon to calculate an E(r) but to set up the equation with the appropriate weighting factors only
7. Which of the following is correct? (Points : 2)
(1) A change in the inherent risk of an investment will cause a movement along the Security Market Line.
(2) A change in investors' attitudes toward risk will cause a change in the market risk premium, and cause a change in the slope of the Security Market Line.
(3) A change in the inherent risk of an investment will cause the Security Market Line to shift.
(4) A change in expected real growth, capital market conditions or expected rate of inflation will cause a parallel shift of the Security Market Line.
1, 2, 3, and 4.
1, 2, and 4.

1 and 2 only.

Explanation / Answer

5)
22% =4% + Beta*(18%-4%)
18%/14% = beta
Beta = 1.29

7)
1, 2, and 4.

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.