investment

Would you expect the required rate rate of returns for a U.S investor in U.S common stocks to be the same as
the required rate of return on Japanese common stocks? what factors would determine the require rate of return for stocks in these countries?

Invstors demand a higher risk-free rate of return (which might correspond, for exmaple, to the 10-year T-bond rate) in countries where the inflation expectation is higher. This rate is currently higher in the US than (for exmaple) Europe and Japan, and our currency value with respect to the world's other major currencies is also falling.

The required rate of return for stocks tends to be higher than that for bonds, because of the higher volatility of stocks. Therefore two factors influencing the relative rate in different countries are 1: inflation expectation for the currency and 2: stock market volatility (usually represented by a "beta" coefficient). Most developing countries have a higher stock market beta than the USA. Japan suffered a major stock market collapse and slow recovery that has lasted over 20 years. Memories of this continue to affect investor confidence in Japan.

1. 👍 0
2. 👎 0
3. 👁 155

Similar Questions

1. finance

cpu company currently pays a divdend of \$2.50. dividends are expected to increase at the rate of \$.25 per share for the next several years. determine the current rate of CPU's common stock to an investor who expects to be able to

asked by gina on October 3, 2010
2. Finance

Th e Seneca Maintenance Company currently (that is, as of year 0) pays a common stock dividend of \$1.50 per share. Dividends are expected to grow at a rate of 11 percent per year for the next four years and then to continue

asked by Stacie on November 20, 2011
3. Finance

The Seneca Maintenance Company currently (that is, as of year 0) pays a common stock dividend of \$1.50 per share. Dividends are expected to grow at a rate of 11 percent per year for the next 4 years and then to continue growing

asked by Raechelle on February 22, 2012
4. Finance

Year Cash Flow 1 \$695,000 2 876,250 3 1,057,500 4 1,238,750 5 1,420,000 1. Calculate the IRR and NPV of this project utilizing a 12% discount rate and a 15% cap rate. Ms. Brown was able to secure a loan for \$1,540,000, and an

asked by Quentin on July 19, 2010
5. Finance

How do you determine the value of a 1,000 bond with a 7 percent coupon rate maturing in 20 tears for an investor whose required rate of return is 8 percent? Please show formula and result

asked by Angel on October 30, 2008
1. Finance/Math

PLease help, I have a business finance class I am really ineed of help. I do not understand this at all. I have gone over and over the instructions and I am still getting it wrong. Please help. Year Cash Flow 1 \$695,000 2 876,250

asked by Courtney on July 27, 2010
2. math

Investor A deposits 1,000 into an account that earns an interest rate of 6% per annum compounded semi-annually. On the same date, Investor B deposits 800 into an account that earns an interest rate of 8% per annum compounded

asked by Anonymous on August 4, 2014
3. STOCKS & BONDS

The real risk-free rate of return has been estimated to be 2 percent under current economic conditions. The 30-day risk-free rate (annualized) is 5 percent. Twenty-year U.S. government bonds currently yield 8 percent. The yield on

asked by Yinka on November 15, 2012
4. homework

Ms. Brown estimates the following cash flow for the first five years of operations, with cash flow leveling off in year 5. Year Cash flow Year 1 \$695,000 Year 2= 876,250 Year 3= 1,057,500 Year 4= 1,238,750 Year 5= 1, 420,000

asked by Anonymous on June 9, 2010
5. Math

What is the value of a stock that grows at a supernormal rate of 18% for the first four years, and then slows down to a constant growth rate of 10%? An annual dividend of \$2.00/share was just paid, and the rate of return on common

asked by Lyra on June 23, 2017

More Similar Questions