The market risk premium is 10.0 percent, and the risk-free rate is 4.2 percent. If the expected return on a bond is 10.5 percent, what is its beta? (Round answer to 2 decimal places, es. 15.25.) Beta of the bond

Beta of the bond = 0.63

Explanation:

According to the CAPM, Capital Asset pricing mode formulae, The expected return is given as

Expected return= Risk free rate + Beta ( Market  premium)

where

Expected return =  10.5 percent

Market risk premium =10.0 percent

risk-free rate is 4.2 percent.

Expected return= Risk free rate + Beta ( Market  premium)

Putting their values and solving, we have

10.5% = 4.2%+ Beta (10.0%)

10.5 %- 4.2%=Beta (10.0%)

Beta=10.5 %- 4.2%/10.0%

Beta=0.63.

Beta of the bond = 0.63

b. a single paragraph.

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a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.