Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. The return from US Treasury bill is 5%. The expected rate ofreturn required by the market for a portfolio is 15%. Accordingto the CAPM, what is the rate of return of a stock with a Beta of2.5?a. 10%b. 28%C. 30%d. 32.75%

We need to use capital assts pricing model(CAPM) to calculate rate of return of stock. CAPM equation…

Answered: The return from US Treasury bill is 5%.…

The return from US Treasury bill is 5%. The expected rate of return required by the market for a portfolio is 15%. According to the CAPM. what is the rate of return of a stock with a Beta of

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Note:-

Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.

The return from US Treasury bill is 5%. The expected rate of
return required by the market for a portfolio is 15%. According
to the CAPM, what is the rate of return of a stock with a Beta of
2.5?
a. 10%
b. 28%
C. 30%
d. 32.75%

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