# Project #44997 - Chapter 10

1.

 Suppose Netflix, Inc., has a beta of 3.92. If the market return is expected to be 12.40 percent and the risk-free rate is 5.00 percent, what is Netflix' risk premium? (Round your answer to 2 decimal places.)

2.

 You own \$19,432 of Human Genome stock that has an assumed beta of 3.76. You also own \$10,063 of Frozen Food Express (assumed beta = 1.88) and \$5,205 of Molecular Devices (assumed beta = 0.60).

 What is the beta of your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places.)

 Portfolio beta

3.

 Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 2 decimal places.)

 Economic State Probability Return Fast growth 0.20 55 % Slow growth 0.58 22 Recession 0.22 –33

 Expected return %

4.

 If the risk-free rate is 7.00 percent and the risk premium is 8.0 percent, what is the required return?(Round your answer to 1 decimal places.)

 Required return %

5.

 The average annual return on an Index from 1986 to 1995 was 13.80 percent. The average annual T-bill yield during the same period was 5.10 percent.

 What was the market risk premium during these ten years? (Round your answer to 2 decimal place.)

6.

 Suppose Universal Forest’s current stock price is \$44.50 and it is likely to pay a \$0.55 dividend next year. Since analysts estimate Universal Forest will have a 8.8 percent growth rate, what is its required return? (Round your answer to 2 decimal places.)

 Required return %

7.

 You have a portfolio with a beta of 1.69. What will be the new portfolio beta if you keep 86 percent of your money in the old portfolio and 14 percent in a stock with a beta of 0.96? (Do not round intermediate calculation and round your answer to 2 decimal places.)

 New portfolio beta

8.

 You have assigned the following values to these three firms:

 Price Upcoming Dividend Growth Beta Estee Lauder \$ 48.00 \$ 0.70 8.70 % 0.97 Kimco Realty 39.00 1.69 13.00 1.36 Nordstrom 7.00 0.80 7.00 1.09

 Assume that the market portfolio will earn 15.40 percent and the risk-free rate is 4.40 percent.

 Compute the required return for each company using both CAPM and the constant-growth model. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

 CAPM Constant-growth model Estee Lauder required return % % Kimco Realty required return % % Nordstrom required return % %

9.
 Hastings Entertainment has a beta of 0.39. If the market return is expected to be 15.60 percent and the risk-free rate is 7.60 percent, what is Hastings’ required return? (Round your answer to 2 decimal places.)

 Hastings’ required return %

10.

 Nanometrics, Inc., has a beta of 3.21. If the market return is expected to be 10.20 percent and the risk-free rate is 4.20 percent, what is Nanometrics’ required return? (Round your answer to 2 decimal places.)

 Nanometrics’ required return %

 Subject Business Due By (Pacific Time) 10/30/2014 12:00 am
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