HomeworkLib
Question

The common stock of Up-Towne Movers is selling for $33 a share and has a beta...

The common stock of Up-Towne Movers is selling for $33 a share and has a beta of 1.25. If the CAPM expected return is 15.5% and the market risk premium is 10.0%, what is the risk free rate of return?

Group of answer choices

2.0% 3.0% 12.5% 13.5%

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Expected rate=risk free rate+Beta*market risk premium

15.5=risk free rate+(1.25*10)

risk free rate=15.5-12.5

=3%

1 0
Add a comment
Know the answer?
Add Answer to:
The common stock of Up-Towne Movers is selling for $33 a share and has a beta...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • The stock in Up-Towne Movers is selling for $45.80 per share. Investors have a required return of 10.8 percent and expec...

    The stock in Up-Towne Movers is selling for $45.80 per share. Investors have a required return of 10.8 percent and expect the dividends to grow at 4.2 percent indefinitely. What was the dividend the company just paid?

  • 3.The stock in Up-Towne Movers is selling for $47.20 per share. Investors have a required return...

    3.The stock in Up-Towne Movers is selling for $47.20 per share. Investors have a required return of 9.8 percent and expect the dividends to grow at 4.1 percent indefinitely. What was the dividend the company just paid? 4.CDB stock is currently priced at $72. The company will pay a dividend of $4.25 next year and investors require a return of 10.4 percent on similar stocks. What is the dividend growth rate on this stock?

  • Ebey’s Enterprises has a beta of 2. The stock is currently selling for $12 a share....

    Ebey’s Enterprises has a beta of 2. The stock is currently selling for $12 a share. The overall stock market has a10 percent rate of return and a risk premium of 8 percent. What is the firm’s cost of equity? Group of answer choices 2% 20% 6% 22% 18%

  • JoyFM common stock has a beta of 1.98. The stock is currently selling for $12 a...

    JoyFM common stock has a beta of 1.98. The stock is currently selling for $12 a share. The expected market return is 11 percent, and the expected market risk premium is 8 percent. According to analysts’ estimates, its dividend will grow at 5% per year. The company is expected to pay a dividend of $1.7 per share next year. What is the cost of equity of JoyFM company (Use SML and DGM)?

  • Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 1.7. The risk-free...

    Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 1.7. The risk-free rate is 4%, and the market return is 9%. a. Determine the risk premium on Netflix common stock. b. Determine the required return that Netflix common stock should provide c. Determine Netflix's cost of common stock equity using the CAPM. a. The risk premium on Netflix common stock is %. (Round to one decimal place)

  • Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 1.6. The risk-free...

    Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 1.6. The risk-free rate is 5%, and the market return is 9%. a. Determine the risk premium on Netflix common stock. b. Determine the required return that Netflix common stock should provide. c. Determine Netflix's cost of common stock equity using the CAPM.

  • 3 P9-9 (similar to) Cost of common stock equity-CAPM Netflix common stock has a beta, b,...

    3 P9-9 (similar to) Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 1.4. The risk-free rate is 5%, and the market return is 12%. 1. Determine the risk premium on Netflix common stock . Determine the required return that Netflix common stock should provide -. Determine Netflix's cost of common stock equity using the CAPM. 1. The risk premium on Netflix common stock is %. (Round to one decimal place)

  • Cost of common stock equity-CAPM J&M Corporation common stock has a beta, b, of 0.6. The...

    Cost of common stock equity-CAPM J&M Corporation common stock has a beta, b, of 0.6. The risk-free rate is 4%, and the market return is 9% a. Determine the risk premium on J&M common stock. b. Determine the required return that J&M common stock should provide. c. Determine J&M's cost of common stock equity using the CAPM.

  • Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 0.8. The risk-free...

    Cost of common stock equity-CAPM Netflix common stock has a beta, b, of 0.8. The risk-free rate is 6%, and the market return is 14%. a. Determine the risk premium on Netflix common stock b. Determine the required return that Netflix common stock should provide c. Determine Netflix's cost of common stock equity using the CAPM. a. The risk premium on Netflix common stock is %. (Round to one decimal place) b. The required return that Netflix common stock should provide is % (Round to...

  •  Netflix common stock has a​ beta, b​, of 0.7. The​ risk-free rate is 6 %​, and...

     Netflix common stock has a​ beta, b​, of 0.7. The​ risk-free rate is 6 %​, and the market return is 13​%. a.  Determine the risk premium on Netflix common stock. b.  Determine the required return that Netflix common stock should provide. c.  Determine​ Netflix's cost of common stock equity using the CAPM

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT