Shifty Ltd has a beta of 1.28. Government Bonds are providing a return of 1.34% and...
Shifty Ltd has a beta of 1.28.
Government Bonds are providing a return of 1.34% and the market is currently returning 14.98%.
Calculate the the return Shifty is expected to provide based on its relative risk (to TWO decimal places ignoring the % sign)
Homework Answers
| Under the Capital Asset pricing model | ||||||
| Rs = Rf + Beta*(Rm-Rf) | ||||||
| Rs is the expected return on the security | ||||||
| where Rf is the risk free rate that is .0134 | ||||||
| Rm is the expected return on the market that is .1498. | ||||||
| Beta is 1.28. | ||||||
| Rs = .0134 + 1.28*(.1498 - .0134) | ||||||
| The expected return for the Shifty Ltd stock is .187992. | ||||||
| In other words, the expected return for the Shifty Ltd stock is 18.79%. | ||||||
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