If the market risk premium is 12.4 percent and the risk-free rate is 4.8, what is the expected rate of return for a stock with a beta of 1.08 under the Capital Asset Pricing Model (CAPM)? (show your answer in decimal form to four places)
Answer - Expected Rate = 18.192%
Reason -
CAPM = Risk free rate + ( Beta * Market risk premium )
= 4.8% + ( 1.08 * 12.4%
= 4.8% + 13.392%
= 18.192%
If the market risk premium is 12.4 percent and the risk-free rate is 4.8, what is...
If you know the risk-free rate, the market risk-premium, and the beta of a stock, then using the Capital Asset Pricing Model (CAPM) you will be able to calculate the expected rate of return for the stock. True False
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