1. The market risk premium for next period is 9.62% and the risk-free rate is 1.46% . Stock Z has a beta of 1.214 and an expected return of 10.17%.
Compute the following:
a) Market's reward-to-risk ratio :
b) Stock Z's reward-to-risk ratio :
2. An analyst gathered the following information for a stock and market parameters: stock beta = 1.490; expected return on the Market = 8.50%; expected return on T-bills = 1.20%; current stock Price = $7.64; expected stock price in one year = $11.85; expected dividend payment next year = $3.12. Calculate the "
a) Required return for this stock
b) Expected return for this stock