Question

(Capital asset pricing model) Levine Manufacturing Inc. in considering several investments in the popup window In The rate on Tremur bite currently 6.0 percent, and the expected return for the market is 118 percent. What should be the required rate of rotum for each Investment using the CAPMYO a. Using the CAPM the required rate of return for security AI IX (Round to two decimal places) b. Using the CAPM, the required rate of return for security Bit Round to two decimal places.) c. Using the CAPM. the required rate of return for security is %. Round to two decimal places.) d. Using the CAPM, the required role of retum for security D. (Round to two decimal places)

Answer 1

Given, Beta of secerity A (BA) - 1-73 Bera of security (0) Bera of security & (P) = 101 0.51 Beta of secenity D (B) = 1.16, ABK free rate 2 51: che) expected reum of market (Rm 2 11.54. Calculation of recured using cap requered sehem Of A - RE+ P (king) S+ 1.73 (11.5-5) St11.245 2 16.2454 cor) 16.247 requred rehim of B = Ret Bo (Rm Rf) 2 5+101(1.5-5 11.5654 2 11.56y.

ft B (Pen Pf) reauned rehm sic = 2 5 +0.51(11.5-5). 8.3151 2 8-321 required rehm of D = Ret Bo (Rom Re) 5+ 116 (11.55) 2 12.544