QUESTION 7 4. There are two stocks you are 16.00%. Compared to the less risky st

Question

QUESTION 7 4. There are two stocks you are 16.00%. Compared to the less risky stock, the riskier stock has to buy, sock A and B Stock A has a beta ore 9 and Sack B has a beta of 37 Treasury-hills have a retm nte of 2.00% and the market portfolio has a return of a 357% higher expected return b. 39.2% lower expected return. c. 392% higher expected retum. d. 36.5% higher expected return. e. 363% lower expected return. QUESTION 8 Group's cost of retained earnings is 9% cost of mek is 41%and its cost ofdebt is 10% The opennal capital structure is 35% common stock, 35% preferred stock and 30% of The firm will not be issuing any new stock and the magnal tax rate is 35%, what is the weigkedavenge costofapinal for American International Group? 0 a 18.55% a. 20.50% d, 19A5% e. 18.09% QUESTION 9 b, 15.20% 13.71% d. 14.90% 013.86% QUESTION 10

Explanation / Answer

You have asked question 7, so the answer with details is as follows:

Stock A expected return=2.00%+0.9*(16%-2%)=14.60%

Stock B expected return=2.00%+3.7*(16%-2%)=53.80%

Returns difference=53.80%-14.60%=39.2%

so the answer is 39.2% higher expected return

the above is the answer

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