o Verizon 8:47 PM ezto.mheducation.com Suppose that the Treasury bill rate is 5%

Question

o Verizon 8:47 PM ezto.mheducation.com Suppose that the Treasury bill rate is 5% rather than 3%. Assume that the expected return on the market stays at 11%. Use the following information. Stock Beta (8) 2.21 1.80 144 1.22 1.21 0.99 0.67 0.59 0.55 0.33 a. Calculate the expected return from H. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected return b. 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.) Highest expected return 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.) Lowest expected return

Explanation / Answer

1 Expected Return from H Risk Free Rate=5% Beta=0.59 Expected Market Rate=11% Expected Return for H= Risk Free Rate+Beta(Expected Market Rate-Risk Free Rate) 0.05+0.59*(0.11-0.05) 0.0854 is 8.54% 2&3 Stocks Risk Free Rate of Return Beta Rm-Rf Beta*(Rm-Rf) Rf+Beta(Rm-RF) Expected Rate of Return A 0.05 2.21 0.06 0.1326 0.1826 18.26 Highest Rate of Return B 0.05 1.8 0.06 0.108 0.158 15.8 C 0.05 1.44 0.06 0.0864 0.1364 13.64 D 0.05 1.22 0.06 0.0732 0.1232 12.32 E 0.05 1.21 0.06 0.0726 0.1226 12.26 F 0.05 0.99 0.06 0.0594 0.1094 10.94 G 0.05 0.67 0.06 0.0402 0.0902 9.02 H 0.05 0.59 0.06 0.0354 0.0854 8.54 I 0.05 0.55 0.06 0.033 0.083 8.3 J 0.05 0.33 0.06 0.0198 0.0698 6.98 Lowest Rate of Return

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