Question

Calculate Expected return for stock H,T,P,W

(Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is 6 percent, and the expected return for the market is 12.5 percent. Using the CAPM, what rates of return should Anita require for each individual security? Stock Beta Н 0.78 1.79 T 0.97 1.31 W %. (Round to two decimal places.) a. The expected rate of return for security H, which has a beta of 0.78, is

Answer 1

STOCK
H	Expected Return =	Risk free Return + (Market Return - Risk free return)* Beta
	Expected Return =	6%+ (12.5% - 6%) * 0.78
	Expected Return =	11.07%
T	Expected Return =	Risk free Return + (Market Return - Risk free return)* Beta
	Expected Return =	6%+ (12.5% - 6%) * 1.79
	Expected Return =	17.64%
P	Expected Return =	Risk free Return + (Market Return - Risk free return)* Beta
	Expected Return =	6%+ (12.5% - 6%) * 0.97
	Expected Return =	12.31%
W	Expected Return =	Risk free Return + (Market Return - Risk free return)* Beta
	Expected Return =	6%+ (12.5% - 6%) * 1.31
	Expected Return =	14.52%