Ask Question
BusinessBusiness
28 June, 12:25

Thayer Farms stock has a beta of 1.38. The risk-free rate of return is 3.87 percent, the inflation rate is 3.93 percent, and the market risk premium is 9.03 percent. What is the expected rate of return on this stock?

+1
Answers (1)
  1. 28 June, 12:34
    0
    Answer: 16.33%

    Explanation:

    With the details given, the best method of Calculating the expected rate of return is the Capital Asset Pricing Model (CAPM).

    The formula is,

    Er = Rf + b (Rm - Rf)

    Where,

    Er is expected return

    Rf is the risk free rate

    b is beta

    Rm - Rf is the Market Premium

    Er = 3.87% + 1.38 (9.03)

    = 3.87% + 12.4614%

    = 16.33%

    The model accounts for inflation by including the risk free rate which is already adjusted for inflation.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Thayer Farms stock has a beta of 1.38. The risk-free rate of return is 3.87 percent, the inflation rate is 3.93 percent, and the market ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
In preparing consolidated working papers, beginning retained earnings of the parent company will be adjusted in years subsequent to acquisition with an elimination entry whenever: a. a noncontrolling interest exists. b.
Answers (1)
On January 1, 2020, Waterway Company sold 11% bonds having a maturity value of $700,000 for $783,845, which provides the bondholders with a 8% yield.
Answers (1)
In a market economy, supply and demand are important because they a. play a critical role in the allocation of the economy's scarce resources. b. determine how much of each good gets produced. c.
Answers (1)
Redding Corp. reported the following information in its 2017 annual report (in millions). Plans' assets at fair value, January 1, 2017 $18,394 Actual return on plans assets 2,034 Company contributions 1,394 Benefits paid 1,792 Expected return on
Answers (1)
Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bill. a. According to Coase's Theorem what is the optimal level of trash in the park? b.
Answers (1)
New Questions in Business
Rent seeking is an attempt to A. use the government for individual benefit at the expense of others. Regulatory capture is an example of this, where a regulatory agency makes decisions benefiting the firm being regulated. B.
Answers (1)
An Insurance company is a business in which it pays to the company if there is a loss, damage, treatments or injury for the payment of premium amount. It calculates the risks that has occurred and pays to compensate the premium amount.
Answers (1)
Pool Line is the manufacturer of a pool cleaning system that has been called by the pool construction industry, "the miracle we have waited a lifetime for." The cleaning system is very effective and recommended by all consumer magazines.
Answers (1)
Use the following example to answer the following questions: Imagine that Stella deposits $25,000 in currency (which she had been storing in her closet) into her checking account at the bank.
Answers (1)
Barr Corp. started a long-term construction project in 20X0. The following data relate to this project: Contract price $4,200,000 Costs incurred in 20X0 $1,750,000 Estimated costs to complete $1,750,000 Progress billings $900,000 Collections on
Answers (1)
Home » Business » Thayer Farms stock has a beta of 1.38. The risk-free rate of return is 3.87 percent, the inflation rate is 3.93 percent, and the market risk premium is 9.03 percent. What is the expected rate of return on this stock?
Sign Up Forgot Password?