HMA Universal and the market have had the following returns over

jagguarpaw January 18, 2017 0 Comments

Question: HMA, Universal, and the market have had the following returns over….

Please include formulas!

HMA, Universal, and the market have had the following returns over the past four years:

Year Market HMA Universal
1 11% 10% 12%
2 7% 4% -3%
3 17% 12% 21%
4 -3% -2% -5%

The risk-free rate is 7 percent. The market risk premium is 5 percent. The expected rate of return on both stocks is 12 percent. Which stock would you purchase?