1. Suppose the nominal rate is 15%, the real rate is 10.5%, what is the inflation rate? If the investors require a 10% real rate of return and the inflation rate is 8%, what is the nominal rate? The nominal rate is 15.5% and the inflation rate is 5%, what is the real rate? -------------------
2. Assume Risk-free rate = 3%, Expected return on the market = 8%. Calculate the expected return on the stock if the beta is
.0
0.5
1
2
Interpret your answers
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3. Suppose the return on Stock A is 9.5%, the return on the market portfolio is 8%, and the risk-free rate is 2%. Solve for beta for Stock A.
Suppose the return on Stock A is 16%, the return on the market portfolio is 10%, and the beta for Stock A is 1.8. Compute the risk-free rate.
Suppose the return on Stock A is 10.1%, the beta for Stock A is 1.2. If the risk-free rate is 3.5%, compute the return on the market and the market risk premium.