Asked by
Surabhi Singh
on Dec 02, 2024
Verified
Cookie Baking expects to pay $2.40 dividend next year ( D 1 = 2.40) and the dividend is expected to grow at 4 percent annually. Cookie has an estimated standard deviation of .24, the market portfolio has a standard deviation of .12, the market expected return is .13 and the risk-free rate is .05. The correlation between Cookie and market returns is 0.8. What are Cookie's beta and required rate of return?
A) 1.16, 0.116
B) 0.178, 1.6
C) 1.6, 0.178
D) 0.16, 2.60
Required Rate
The minimum return an investor expects to achieve on an investment, considering the risk level associated with the investment.
Standard Deviation
A measure of the amount of variation or dispersion of a set of values, used in statistics to quantify the variability or spread of a data set.
- Comprehend the idea of beta and its role in assessing a security's exposure to market risk.
- Gain an understanding of the Capital Asset Pricing Model (CAPM) and its key elements.
Verified Answer
RD
Learning Objectives
- Comprehend the idea of beta and its role in assessing a security's exposure to market risk.
- Gain an understanding of the Capital Asset Pricing Model (CAPM) and its key elements.