16. Using CAPM A stock has an expected return of 10.2 percent and a beta of...
16. Using CAPM A stock has an expected return of 10.2 percent and a beta of .91, and the expected return on the market is 10.8 percent. What must the risk-free rate be?
Homework Answers
Return on Stock =Risk free rate+ [Beta * (Market return -risk free rate ) ]
10.2 = Risk free rate + [.91 * (10.8- Risk free rate)]
10.2 =Risk free rate + 9.828 - .91 Risk free rate
10.2 -9.828 = Risk free rate - .91 Risk free rate
.372 = .09 Risk free rate
Risk free rate = .372 /.09
= 4.13333% (rounded to 4.13%)
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16. Using CAPM A stock has an expected return of 10.2 percent
and a beta of...
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7. 16. Using CAPM. A stock has an expected return of 10.2 percent and a beta of.91, and the expected return on the market is 10.8 percent. What must the risk-free rate be?
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