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Would Exxon Mobil offer a higher or lower expected return if the interest rate were 8%?

05 / 03 / 2018 Assignment

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Stock Beta Expected Return

Amazon 2.16 15.4

Ford 1.75 12.6

Dell 1.41 10.2

Starbucks 1.16 8.4

Boeing 1.14 8.3

Disney .96 7.0

Newmont .63 4.7

Exxon Mobil .55 4.2

Johnson & Johnson .50 3.8

Campbell
Soup .30 2.4

8-6: Suppose that the Treasury bill rate were 6%
rather than 4%. Assume that the expected return on the market stays at 10%. Use
the betas above.

a. Calculate the expected
return from Dell.

b. Find the highest
expected return that is offered by one of these stocks.

c. Find the lowest
expected return that is offered by one of these stocks.

d. Would Ford offer a
higher or lower expected return if the interest rate were 6% rather than 4%?
Assume that the expected market return stays at 10%.

e. Would Exxon Mobil
offer a higher or lower expected return if the interest rate were 8%?


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