Ask Question
BusinessBusiness
28 August, 04:35

Assume that you are given the following historical returns for the Market and Security J. Also assume that the expected risk-free rate for the coming year is 4.0 percent, while the expected market risk premium is 16.0 percent. Given this information, determine the required rate of return for Security J for the coming year.

+2
Answers (1)
  1. 28 August, 07:14
    0
    the answer is 7%

    Explanation:

    If we estimate the beta as a proportion between the expected risk - free rate and the expected market value, we obtain 4%/16%=25%

    b=0.25 r=?

    r_m=0.16

    r_ref=0.04

    then we use the CAPM Model

    r=r_ref + b (r_m-r_ref)

    r = 0.04+0.25 * (0.16-0.04) = 0.07
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Assume that you are given the following historical returns for the Market and Security J. Also assume that the expected risk-free rate for ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Mighty Corporation manufactures end tables. Each end table requires. 50 direct labor hours in its production. Mighty Corporation has a direct labor rate of? $15 per direct labor hour.
Answers (1)
Finance companies that buy receivables from businesses are called
Answers (1)
Explain four different group/categories of people with whom the manager deals/work
Answers (1)
Goods or services are capable of being distinct if: a. The seller regularly sells the good or service separately. b.
Answers (1)
Should the retail price of a proposed garment be one of the factors considered by the npd committee at the screening stage?
Answers (1)
New Questions in Business
When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d.
Answers (1)
A magazine subscription costs $45 per year at the beginning of each year, or $115 now for a three-year subscription. If the subscriber elects to pay the $115 now, the rate of return on the investment will be nearest to:
Answers (2)
The second step in rational decision making is to: choose the solution that maximizes value. identify the criteria that are important in making the decision. evaluate the alternatives. implement the alternative.
Answers (1)
What impact will a spike in wages cause to the labor demand curve?
Answers (1)
A company issued 8%, 15-year bonds with a par value of $500,000 that pay interest semiannually. The market rate on the date of issuance was 8%.
Answers (1)
Home » Business » Assume that you are given the following historical returns for the Market and Security J. Also assume that the expected risk-free rate for the coming year is 4.0 percent, while the expected market risk premium is 16.0 percent.
Sign Up Forgot Password?