When the three month treasury bill rate is 0.4%, and return on the S&P; 500 inde

Question

When the three month treasury bill rate is 0.4%, and return on the S&P; 500 index is 7.7% Per year. The Beta for Walmart stock is 0.19 and the beta for Apple Computer Inc. is 1.46. a. In the diagram above, please fill in (A) and (B) with both symbols in the SML and numbers. b. Mease calculate the market risk premium with an equation. c. Please calculate the risk premium of Walmart Stock following the SML with an equation. d. Please calculate the expected return on Walmart stock with an equation. e. Please calculate the expected return on Apple Computer inc. stock. f. In the above diagram, please indicate the corresponding beta and expected return for Walmart and Apple Computer Inc. respectively g. There is a portfolio consists of 50% of the market portfolio and 50% of Apple Computer Inc. Stock. What is the expected return on this portfollo?

Explanation / Answer

Answer:b Market risk premium=Erm-Rf

=7.7%-0.4%=7.3%

Answer:c walmart stock=0.4%+B7.3%

Answer:d Ke=0.4%+0.19*7.3%

=1.787%

Answer:e Er (Apple)=0.4%+1.46*7.3%

=11.058%

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

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