Mack Motors has a beta of 1.1. Real risk free return is 2 % , expected...

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Question

business finance

Answer 1

Answer #1

Q - 6

Mack's required rate of return = real risk free return + inflation + Beta x market risk premium = 2% + 3% + 1.1 x 4.7% = 10.17%

Q - 7

Stock return = 11.75% = risk free rate + Beta x (Market return - risk free rate) = 4.3% + 1.23 x (Market return - 4.3%)

Hence, Market return = 4.3% + (11.75% - 4.3%) / 1.23 = 10.36%

Answer 2

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