Calculate the firm’s expected return using the capital asset pricing model: Risk Free Rate: 2.5% Market Return: 7% Beta: 1.5 Standard Deviation: 6% Debt: Equity Ratio: 40%
As per Capital Asset Pricing Model, | ||||||||||
Expected return | = | Risk free rate | + | Beta | * | (Market return - Risk free rate) | ||||
= | 2.50% | + | 1.5 | * | (7%-2.5%) | |||||
= | 2.50% | + | 1.5 | * | 4.50% | |||||
= | 9.25% |
Calculate the firm’s expected return using the capital asset pricing model: Risk Free Rate: 2.5% Market...
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