Ans :
4.
9. According to Capital asset pricing model,
E(r) = Rf + Beta*(M(r) –Rf)
E(r) = Expected rate of return = 0.94
Rf = Risk free return = 1.01 %
Beta = 0.94
M(r) - Rf = market risk premium = 7.47 %
Insert above data in the formula, E(r) = Rf + Beta*(M(r) –Rf)
E(r) = 1.01 % + 0.94 * 7.47 %
= 1.01 % + 7.0218 %
= 8.0318 %
= 8.03 %
5.
9. According to Capital asset pricing model,
E(r) = Rf + Beta*(M(r) –Rf)
E(r) = Expected rate of return = ?
Rf = Risk free return = 1.88 %
Beta = 1.13
M(r) = Market return = 9.45 %
Insert above data in the formula, E(r) = Rf + Beta*(M(r) –Rf)
= 1.88 % + 1.13 *(9.45 - 1.88)
= 1.88 % + 1.13 * 7.57 %
= 10.4341 %
= 10.43 %
The risk-free rate is 1.01% and the market risk premium is 7.47%. A stock with a...
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