Find interest rate (or rates of return) in each of the following:
You borrow $9,000 and promise to make payment of $2,684.80 at the end of each of the next 5 years.
6-1
Your investment club has only two stocks in its portfolio, $20,000 is invested stock with a beta of 0.7 and $35,000 is invested in a stock with a beta of 1.3. What is the portfolio's beta?
6-2
AA Industries' stock has a beta of 0.8. The risk-free is 4% and the expected return on the market is 12%. What is the required rate of return on AA's stock?
6-3
Suppose the risk-free rate is 5% and that the market risk premium is 7%. What is the require return on (1) the market, (2) a stock with a beta of 1.0 and (3) a stock with a beta of 1.7? Assume that the risk premium is 7%.