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Computing required rate of return on stock

Company has a beta of 3.25 and a standard deviation of returns of 27%. The return on the market portfolio is 13% and the risk free rate is 5%. What is the risk premium on the market? According to CAPM, what is the required rate of return on stock?

Please Show work! Ans 42.25%, 40.00%, 31.00%, 29.25%

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Finance Basics: Computing required rate of return on stock

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Computing required rate of return on stock

Reference No:- TGS0559323

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

Q : Compute berclairs basic and diluted earnings per share

Q : Determining the after tax cost of capital

Q : Question regarding after tax cost of capital

Q : What is cost of common equity

Q : Computing required rate of return on stock

Q : What is the company-s cost of preferred stock rp

Q : What is company-s after-tax cost of debt

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Computing required rate of return on stock

Reference No:- TGS0559323

Recent Questions Asked Finance Basics

Q : Compute berclairs basic and diluted earnings per share

Q : Determining the after tax cost of capital

Q : Question regarding after tax cost of capital

Q : What is cost of common equity

Q : Computing required rate of return on stock

Q : What is the company-s cost of preferred stock rp

Q : What is company-s after-tax cost of debt

Q : How much of the interest income is taxable

Q : Fixed exchange rate and floating exchange rate systems

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