Question

The Treasury bill rate is 6%, and the expected return on the market portfolio is 12%. According to the capital asset pricing model: 

a. What is the risk premium on the market? 

b. What is the required return on an investment with a beta of 1.7? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) 

c. If an investment with a beta of 0.9 offers an expected return of 8.7%, does it have a positive or negative NPV? 

d. If the market expects a return of 11.7% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 

Answer 1