Assume that the risk-free rate is 9% and that the market portfolio has an expected return...
Assume that the risk-free rate is 9% and that the market portfolio has an expected return of 17%. Under equilibrium conditions as described by the CAPM, what would be the expected return for a portfolio having no diversifiable risk and a beta of 0.75?
Homework Answers
Using the CAPM model the expected rate is calculated as follows:-
=riskfree rate+beta*(rm-rf)
=9%+0.75*(17%-9%)
=15.00%
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