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Category > Business & Finance Posted 15 Jul 2017 My Price 7.00

1. A stock has a beta of 1.8

1. A stock has a beta of 1.8. A security analyst who specializes in studying this stock expects its return to be 18 percent. Suppose the risk-free rate is 5 percent and the market-risk premium is 8 percent. Is the analyst pessimistic or optimistic about this stock relative to the market’s expectations?

2. Suppose the expected return on the market is 13.8 percent and the risk-free rate is 6.4 percent. Solomon Inc. stock has a beta of 1.2.

a. What is the expected return on the Solomon stock?

b. If the risk-free rate decreases to 3.5 percent, what is the expected return on the Solomon stock?

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Status NEW Posted 15 Jul 2017 09:07 AM My Price 7.00

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