1) Asset W has an expected return of 17.3 percent and a beta of 1.85. If the ris

Question

1)

Asset W has an expected return of 17.3 percent and a beta of 1.85. If the risk-free rate is 5.0 percent, what is the market risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

2)

Stock Y has a beta of .90 and an expected return of 15.75 percent. Stock Z has a beta of .80 and an expected return of 8 percent. If the risk-free rate is 6.0 percent and the market risk premium is 9.6 percent, what are the reward-to-risk ratios of Y and Z? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Asset W has an expected return of 17.3 percent and a beta of 1.85. If the risk-free rate is 5.0 percent, what is the market risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

1) Expected Return = Risk Free Return + Beta ( Market Risk Premium)

17.3 = 5 + 1.85 ( Market Risk Premium )

17.3 = 5 + 1.85 Market Risk Premium

17.3 - 5 = 1.85 Market Risk Premium

Market Risk Premium = 6.65%

2)

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