1 answer

Given a risk-free rate of return of 3.5 percent, a beta of 1.2, and a return...

Question:

Given a risk-free rate of return of 3.5 percent, a beta of 1.2, and a return on the market portfolio of 14 percent, what is the required rate of return using the CAPM?

a. 14.8%

b. 18.2%

c. 16.1%

d. 13.4%


Answers

Required return=risk free rate+beta*(market rate-risk free rate)

=3.5+1.2*(14-3.5)

which is equal to

=16.1%

.

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