Monkey corporation want to buy stocks in the Goose company, Monkey financlal manager says that the stock fair price is 50 dollars if the treasury bill rate is 0.08 and the covariance between the stock and the market is 0.0034 and the standard deviation of the market is 0.055 the market return is 0.15what is the what is the requirec rate of return ?

Monkey corporation want to buy stocks in the Goose company, Monkey financlal manager says that the stock fair price is 50 dollars if the treasury bill rate is 0.08 and the covariance between the stock and the market is 0.0034 and the standard deviation of the market is 0.055 the market return is 0.15what is the what is the requirec rate of return ?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 4P: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market...

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You live in a world where assets are priced by the CAPM. The following information is given to you regarding stock X. The expected payoff from the stock X=£105.00 Expected return of stock X = 18% Risk-free rate =5% Market Risk Premium = 9% Assume there are no other changes, except that the correlation between the returns of Stock X and the market becomes twice what it is currently. How would this change affect the current price of Stock X? Explain why the change of the correlation causes the observed change in the stock price. [hint: Provide a risk-based explanation]
Monkey corporation want to buy stocks in the Goose company, Monkey financial manager says that the stock fair price is 50 dollars if the treasury bill rate is 0.1 and the covariance between the stock and the market is 0.0033 and the standard deviation of the market is 0.06 ,the market return is 0.15what is the what is the required rate of return ? Answer
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