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(Solution Download) Suppose that the Treasury bill rate is 6% and that the expected return on the market is 2%. Assume t


 

 

 

 

 

 

 

Suppose that the Treasury bill rate is 6% and that the expected

 

return on the market is 2%. Assume

 

that the expected return on the market stays at 10%. Use the

 

following information.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Stock

Beta (?)
  

 

A

1.78

 

     

  

 

B

1.54

 

     

  

 

C

1.53

 

     

  

 

D

0.98

 

     

  

 

E

0.95

 

     

  

 

F

0.80

 

     

  

 

G

0.75

 

     

  

 

H

0.66

 

     

  

 

I

 

0.42      

  

 

J

 

0.40      

 


 

 

 

 

 

 

 

 

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

%

 


 

 

 

 

 

 

 

 

c.

 

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

%

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

d.

 

Assume that the expected market return stays at 10%. Would C

 

offer a higher or lower expected return if the Treasury bill

 

interest rate were 6% rather than 2%?

 

 

 

 

 

 

 

 

 

 

 

 

 

Higher
Lower

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

e.Assume that the expected market

 

return stays at 10%. Would J offer a higher or lower expected

 

return if the interest rate were 6% rather than 8%?

 

 

 

 

 

 

 

 

 

 

 

 

Higher
Lower

 

 


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