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Johnson Paint stock has an expected return of 19% with a beta of 1.7

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Johnson Paint stock has an expected return of 19% with a beta of 1.7, while Williamson Tire stock has an expected return of 14% with a beta of 1.2. Assume the CAMP is true.

a. What is the expected return on the market?
b. What is the risk-free rate?
c. What is the market risk premium?

Risk & Return and the CAPM.

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1. Risk & Return and the CAPM.

Based on the following information, calculate the required return based on the CAPM:
Risk Free Rate = 3.5%
Market Return =10%
Beta = 1.08

2. Risk and Return, Coefficient of Variation

Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.

Std Dev. Exp. Return
Company A 10.4 15.2
Company B 14.6 22.9

3. Risk and Return, Coefficient of Variation

Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.

Std Dev. Exp. Return
Company A 7.4 13.2
Company B 11.6 18.9

4. Portfolio Theory Risk.

What is portfolio theory and why is it important to investing behavior? 250 words

5. Sources of Risk.

Identify sources of risk and contrast them (include examples) and explain why investors should be concerned with them 250 words

I have chosen the following 3 companies to invest stock in

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I have chosen the following 3 companies to invest stock in

Ford Motors (Automotive)
Johnson & Johnson (Drug company)
Target (Retail Chain)

I need help finding the current yield of the 10-year treasury bond and calculating the required rate of return for each of them. I need to be able to show my work and explain how the risk affects your expectations. In the end I want to earn 15% in the market despite the market risks.

If Wild Widgets, Inc. were an all-equity company it would have a beta of 1.55.

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If Wild Widgets, Inc. were an all-equity company it would have a beta of 1.55. The company has a target debt-equity ratio of 0.4. The expected return on the market portfolio is 12.9 percent, and Treasury bills currently yield 5.9 percent. The company has one bond issue outstanding that matures in 23 years and has an 6.8 percent coupon rate. The bond currently sells for $984. The corporate tax rate is 30 percent.

Question #1:
What is the company’s cost of debt? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

Cost of debt:_____%

Question # 2:
What is the company’s cost of equity? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

Cost of equity:_____%

Question # 3:
What is the company’s weighted average cost of capital? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

Weighted average cost of capital:______%

Please check CAPM calculations for Nike, Sony and McDonalds.

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Please check CAPM calculations for Nike, Sony and McDonalds.

CAPM would calculate Nike’s current cost of equity at 2.859%
RE = RF + Beta(RM – RF)
RE = 20% + 0.91(7.50% – 20%)
RE = 2.859%

This calculation is based on a variable market rate of return and a risk free rate. Using a variable market rate of return may be appropriate in comparing companies assuming the market rate is risk-adjusted.

CAPM would calculate Sony’s current cost of equity at 2.148%
RE = RF + Beta(RM – RF)
RE = 20% + 1.48(8.50% – 20%)
RE = 2.148%

CAPM would calculate McDonald Corporation current cost of equity at 2.036%
RE = RF + Beta(RM – RF)
RE = 20% + 0.36(9.50% – 20%)
RE = 2.036%

Please use the following (hypothetical) information to calculate the “cost of equity” by using the CAPM model:

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Please use the following (hypothetical) information to calculate the “cost of equity” by using the CAPM model:

RE = RF + Beta(RM – RF)

Nike = 20% + 0.80(7.50% – 20%) =

Sony = 20% + 1.40(8.50% – 20%) =

McDonald’s = 20% + 0.30(9.50% – 20%) =