Homework Solutions  
» Home

See All Homework
Questions here

Question Description

Posted by: Homeworkhelp
Price Quoted by Student: $8
Posted On: 2010-12-16 12:12:52

Chapter 7-1. (Beta and required return) Piper’s Knits has calculated the contingent returns shown below. The riskless return is currently 5.75%. REALIZED RETURN (Figures in parentheses are negative returns.) State of the Market Probability that State Occurs Stock Market Piper’s Knits Stagnant 0.25 (10%) (15%) Slow growth 0.30 10 15 Average growth 0.30 15 25 Rapid growth 0.15 25 35


a. What is the expected return on the stock market taken as a whole and on Piper’s Knits as an individual stock?

b. Calculate Piper’s Knits’ beta.

c. Using the CAPM formula, calculate Piper’s Knits required return.

Download Excel attachment


SOLUTION a. What is the expected return on the st
Price $8
Attachment 1: Piper’s Knits has.xls
Solution Posted By: Homeworkhelp    Posted on: 16-12-2010