Risk Premiums
You own $15,925 of Denny’s Corp stock that has an assumed beta of 3.36. You also own $35,672 of Qwest Communications (assumed beta = 1.55) and $12,103 of Southwest Airlines (assumed beta = 1.07). Assume that the market return will be 8.0 percent and the risk-free rate is 2.0 percent.
What is the market risk premium?
Market risk premium %
What is the risk premium of each stock? (Round your answers to 2 decimal places.)
Denny’s risk premium %
Qwest’s risk premium %
Southwest Airlines risk premium %
What is the risk premium of the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Portfolio risk premium %