According to the CAPM, what is the expected market return given an expected return on a...

Question

Question

According to the CAPM, what is the expected market return given an expected return on a security of 17.0%, a stock beta of 1.

Answer 1

Answer #1

D. 13%

Expected return = Risk-free rate + Beta(Expected market return - Risk-free rate)

0.17 = 0.05 + 1.5(Expected market return - 0.05)

0.17 = 0.05 + 1.5Expected market return - 0.075

1.5Expected market return = 0.17 - 0.05 + 0.075

1.5Expected market return = 0.195

Expected market return = 0.195 / 1.5

Expected market return = 0.13 or 13%

Answer 2

Similar Homework Help Questions

According to the CAPM, what is the market risk premium given an expected return on a...

According to the CAPM, what is the market risk premium given an expected return on a security of 13.6%, a stock beta of 1.2, and a risk-free interest rate of 4%? Multiple Choice 4% 4.8% 6.6% 8%
According to the CAPM, what is the market risk premium given an expected return on a...

According to the CAPM, what is the market risk premium given an expected return on a security of 9.8%, a stock beta of 1.2, and a risk-free interest rate of 5%? o 6.00% o 6.60% o 5.00% o 4.00%
According to the CAPM, what is the expected return on a security given a market risk premium of 8%

According to the CAPM, what is the expected return on a security given a market risk premium of 8%, a stock beta of 1.23, and a risk free interest rate of 2%?

Consider the CAPM. The risk-free rate is 5%, and the expected return on the market is...

Consider the CAPM. The risk-free rate is 5%, and the expected return on the market is 14%. What is the expected return on a stock with a beta of 1.2? Multiple Choice 22% 17.8% 12.5% 15.8%
Consider the CAPM. The risk-free rate is 5%, and the expected return on the market is...

Consider the CAPM. The risk-free rate is 5%, and the expected return on the market is 17%. What is the expected return on a stock with a beta of 1.5? A. 31% B. 28% C. 13% D. 23%
According to the CAPM, what must be the beta of a portfolio with expected return 0.25,...

According to the CAPM, what must be the beta of a portfolio with expected return 0.25, if the risk-free rate is 0.07 and the market risk premium is 0.12? Assume that the stock is fairly priced according to the CAPM.

Consider the CAPM. The risk-free rate is 6%, and the expected return on the market is...

Consider the CAPM. The risk-free rate is 6%, and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3? Multiple Choice o 6% o 15.6% o 18% o 21.6%
8 MC algo 13-26 CAPM The risk-free rate is 3.4 percent and the market expected return...

8 MC algo 13-26 CAPM The risk-free rate is 3.4 percent and the market expected return is 11.9 percent. What is the expected return of a stock that has a beta of 1.19? oints Multiple Choice References .52% 15.54% 12.01% 19.02% 17.56%
Question 8 Suppose the CAPM holds, given the following information: market portfolio's expected return = 896...

Question 8 Suppose the CAPM holds, given the following information: market portfolio's expected return = 896 risk-free rate = 496 Canyon Buff's beta = 1.5 then expected return for Canyon Buffs stock is closest to? Selected Answer: B. 16.096

a) If the CAPM is correct, what would be the expected return of a risky asset...

a) If the CAPM is correct, what would be the expected return of a risky asset with a beta of 1.2, given a risk free rate of 3% and an expected market risk premium of 4.5%? b) If the CAPM is correct, what would be the expected return of a risky asset with a beta of 0.8, given a risk free rate of 4% and an expected return of the market of 9%