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The beta for Cowboy Industries, Inc. is 1.2. The expected return on the market portfolio is...

The beta for Cowboy Industries, Inc. is 1.2. The expected return on the market portfolio is 14.0% and the risk-free rate is 3.0%. If the CAPM/SML is correct, what is Cowboy Manufacturing’s required (expected) return?

Group of answer choices

16.2%

13.8%

None of these are correct.

12.9%

11.1%

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Answer #1

Required return=risk free rate+beta*(market rate-risk free rate)

=3+1.2*(14-3)

which is equal to

=16.2%

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