|
Stock
|
Beta
|
|
Caterpillar
|
1.66
|
|
Dow Chemical
|
1.65
|
|
Ford
|
1.44
|
|
Microsoft
|
0.98
|
|
Apple
|
0.91
|
|
Johnson & Johnson
|
0.53
|
|
Walmart
|
0.45
|
|
Campbell Soup
|
0.39
|
|
Consolidated Edison
|
0.17
|
|
Newmont
|
0.0
|
Suppose that the Treasury bill rate is 6% and assume that the expected return on the market is 9%. Use the betas in the above table to answer the following questions:
a) Calculate the expected return for Johnson & Johnson.
b) Find the highest expected return that is offered by one of the above stock.
c) Find the lowest expected return that is offered by one of the above stocks.
d) Would Ford offer a higher or lower expected return if the Treasury bill rate was 2% rather than 6%? Assume that the expected market return remains at 9%.
e) Would Walmart offer a higher or lower expected return if the Treasury bill was 8% rather than 6%? Assume the expected market return remains at 9%.