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According to the capital asset pricing model (CAPM) which of the following stocks ahould have the...

According to the capital asset pricing model (CAPM) which of the following stocks ahould have the highest required rate of return?

company Beta. standard deviation
weight watchers. 3.2 15%
Abbott Labs 1.5 22
Mcdonalds 0.7 6
Duke energy 0.2 8
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Answer #1

CAPM = R: + beta(Rm - R)

  

SO the stock with the highest beta will have the highest Required Rate of Return. The highest beta co is Weight Watchers i.e. 3.2. So, it will have the highest Required Rate of Return

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