help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Assuming the risk-free rate is 5% and the market rate is 15%

Assuming the risk-free rate is 5% and the market rate is 15%

Finance

Assuming the risk-free rate is 5% and the market rate is 15%. Assuming Matrade Corporation share is trading at RM60. Within a year, the share price would rise to RM75 and its dividend yield is 5%. What is the expected beta for Matrade for it to rise to that level?

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Computation of Expected Beta for Matrade:

Capital Gains = (Ending Share Price - Current Share Price) / Current Share Price *100

= (75-60)/60*100

= 25%

 

Total Expected Return = Capital Gain + Dividend Yield

= 25%+5%

= 30%.

 

Expected Rate of Return = Risk-free Rate + Beta*( Market Return - Risk-free Rate)

30% = 5%+ Beta*(15%-5%)

25%= Beta*(10%)

Beta = 2.50

So, Expected Beta is 2.50

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)

Related Questions