Suppose that the Treasury bill rate is 6% and the expected return on the market stays at 9%.
Suppose that the Treasury bill rate is 6% and the expected return on the market stays at 9%. Use
the following information.
| Stock | Beta (β) |
| Caterpillar | 1.66 |
| Dow Chemical | 1.65 |
| Ford | 1.44 |
| Microsoft | 0.98 |
| Apple | 0.91 |
| Johnson & Johnson | 0.53 |
| Walmart | 0.45 |
| Campbell Soup | 0.39 |
| Consolidated Edison | 0.17 |
| Newmont | 0.00 |
a. Calculate the expected return from Johnson & Johnson. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Expected return %
b. Find the highest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Highest expected return %
c. Find the lowest expected return that is offered by one of these stocks. (Do not round intermediate calculations. Enter your answer as a percent rounded to the nearest whole number.)
Lowest expected return %
2.
The following table shows the sensitivity of four stocks to the three Fama−French factors. Assume the interest rate is 2%, the expected risk premium on the market is 7%, the expected risk premium on the size factor is 3.5%, and the expected risk premium on the book-to-market factor is 4.8%.
| Boeing | Campbell Soup | Dow Chemical | Apple | |
| Market | 1.13 | .51 | 1.51 | 1.08 |
| Size | −.49 | −.60 | .28 | −.57 |
| Book-to-market | −.05 | .25 | .13 | −.074 |
Calculate the expected return on each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
| Expected Return | |
| Boeing | % |
| Campbell Soup | % |
| Dow Chemical |
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