1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
MA_775_DIABLO [31]
3 years ago
5

According to the CAPM, what is the market risk premium given an expected return on a security of 15.8%, a stock beta of 1.1, and

a risk-free interest rate of 7%? Multiple Choice 7.70% 6.05% 7.00% 8.00%
Business
1 answer:
Anna35 [415]3 years ago
3 0

Answer:

The risk premium on market is 8%

Explanation:

The CAPM or Capital Asset Pricing Model is used to calculate the required rate of return on a stock which is the minimum return that is expected or required by the investors to invest in a stock based on its systematic risk as measured by the beta of the stock.

The formula to calculate r under the CAPM is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the risk premium on market

To calculate the risk premium on market, we will input the available values for r, rRF and beta in the equation above.

0.158 = 0.07 + 1.1 * rpM

0.158 - 0.07 = 1.1 * rpM

0.088 / 1.1 = rpM

rpM = 0.08 or 8%

So, the risk premium on market is 8%

You might be interested in
Why might a business owner prefer to raise capital through a loan rather than through selling shares to an investor ?
MArishka [77]

Answer:

Shareholders can have control over business decisions. With a loan, all the owner owes is principle and interest

7 0
4 years ago
Suppose that you are an economic-policy advisor. Environmental groups are pressuring you to implement the highest-possible carbo
liraira [26]

Answer: a tax equal to the external cost.

Explanation:

The most efficient taxes are those that will be equal to the external cost of production that a company is imposing on the environment. This means in effect that a company is paying for the pollution it is inflicting on the environment.

Companies polluting less would pay less and those polluting more would pay more. This is the logic of a tax equal to the external cost.

3 0
3 years ago
After first obtaining a real estate sales license, said licensee must take how many DRE core three-hour approved continuing educ
Thepotemich [5.8K]

Answer:

5

Explanation:

8 0
3 years ago
You buy a seven-year bond that has a 6.50% current yield and a 6.50% coupon (paid annually). In one year, promised yields to mat
Harlamova29_29 [7]

The current yield and annual coupon rate of 6.50% show that the bond price was at par a year ago.

The givens are FV=1,000, n= 6, PMT = 65.00, and i= 7.50 so with this we know that the selling price this year is $953.06.

So the holding period return is $1,000+$953.06+$65.00

$1,000=0.0181=1.81%

Hope this helps, now you know the answer and how to do it. HAVE A BLESSED AND WONDERFUL DAY! As well as a great rest of Black History Month! :-)  

- Cutiepatutie ☺❀❤

7 0
3 years ago
When did jurassic world come out
steposvetlana [31]
June 12 2k15

I loved that movie and watched it the first day
5 0
3 years ago
Other questions:
  • AJ plans to attend a retreat on mindfulness. He paid a $500 nonrefundable registration fee, made a reservation at a hotel that c
    8·1 answer
  • Which two forms of financial aid require the student to bear the costs of college education??
    11·1 answer
  • The ledger of Claudell Company includes the following unadjusted normal balances: Prepaid Rent $1,000, Services Revenue $55,600,
    15·1 answer
  • William is a single writer (age 35) who recently decided that he needs to save more for retirement. His 2019 AGI before the IRA
    8·1 answer
  • On January 1, 2021, Tru Fashions Corporation awarded restricted stock units (RSUs) representing 5 million of its $1 par common s
    6·1 answer
  • Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 5 pounds
    10·1 answer
  • writing in a business environment differs from other types of writing. in professional settings, written messages and oral prese
    12·1 answer
  • What is a means exam ?
    11·1 answer
  • Which best describes the role of financial planning?
    5·1 answer
  • Imagine that instead of hiring each assitant right away in the hiring assistant problem. we wait until the end to hire the best
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!