You have been scouring The Wall Street Journal looking for s…

You have been scouring The Wall Street Journal looking for stocks that are “good values”  and have calculated expected returns for five stocks. Assume the risk-free rate (rRF) is 4  percent and the market risk premium (rM – rRF) is 3.2 percent.  Which security would be the best a. Expected Return = 9.01%, Beta = 0.8  b. Expected Return = 7.06%, Beta = -0.2 c. Expected Return = 5.04%, Beta = -0.2 d. Expected Return = 8.74%, Beta = 0.3 e. Expected Return = 11.50%, Beta = 0.5

The real risk-free rate of interest is 1 percent.  Inflation…

The real risk-free rate of interest is 1 percent.  Inflation is expected to be 5 percent this  coming year, jump to 7 percent next year, and increase to 8 percent the year after (Year 3).   According to the expectations theory, what should be the interest rate on 2-year, risk-free  securities today?

Given the following probability distribution, what are the e…

Given the following probability distribution, what are the expected return and the standard  deviation of returns for Security J? State                      Pi                              rj     1                          0.4                           6%     2                          0.2                           6%     3                          0.4                           16%

One-year Treasury securities yield 7.6%, 2-year Treasury sec…

One-year Treasury securities yield 7.6%, 2-year Treasury securities yield 7%,  and 3-year Treasury securities yield 7.5%. Assume that the expectations theory  holds. What does the market expect will be the yield on 1-year Treasury  securities two years from now?

Given the following probability distribution, what are the e…

Given the following probability distribution, what are the expected return and the standard  deviation of returns for Security J? State                      Pi                              rj     1                          0.1                           7%     2                          0.2                           4%     3                          0.7                           1%

You have been scouring The Wall Street Journal looking for s…

You have been scouring The Wall Street Journal looking for stocks that are “good values”  and have calculated expected returns for five stocks. Assume the risk-free rate (rRF) is 7  percent and the market risk premium (rM – rRF) is 3.6 percent.  Which security would be the best a. Expected Return = 9.01%, Beta = 0.6 b. Expected Return = 7.06%, Beta = -0.5 c. Expected Return = 5.04%, Beta = -0.6 d. Expected Return = 8.74%, Beta = 0.6 e. Expected Return = 11.50%, Beta = 1.4