11.4 CAPM Suppose the risk-free rate is 8 percent. The expected return on the market is 14 percent. If a particular stock has a beta of .60, what is its expected return based on the CAPM? If another stock has an expected return of 20 percent, what must its beta be? (See Problem 13.)

Q: Expected Return CAPM If you know that the risk-free rate is 4.5% and the expected market risk…

A: CAPM is a model which is used to calculate the expected rate of return on the basis of the risk-free…

Q: a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a…

A: Information Provided: Stock beta = 1.35 Expected return = 16% Risk-free asset return = 4.8%…

Q: The risk-free rate is 3.2 percent. Stock A has a beta = 1.9 and Stock B has a beta = 1.3. Stock A…

A: A potential investment's beta is a measurement of the risk an investment will bring to a portfolio…

Q: 8. Suppose security X achieves 20% return with half chance and -10% return with half chance. (a)…

A: The expected return is the return that an investor expects from its investment. Risk of an asset is…

Q: Stock Y has a beta of 1.15 and an expected return of 11.8 percent. Stock Z has a beta of .85 and an…

A: As per CAPM Expected return = Risk free rate + beta * market risk premium

Q: 6. You currently own a technology stock that has an expected return of 14.9% and its beta is 1.44.…

A: CAPM is the basic theory that links risk and return for all assets. CAPM equation is  rs =Rf…

Q: A stock has a required return of 13%, the risk-free rate is 4.5%, and the market risk premium is 4%.…

A: In order to calculate the stock's beta, we can use the the formula given under capital asset pricing…

Q: 1.25

A: Please note that as per Bartleby answering guidelines, we are allowed to answer only first 3…

Q: . what is the expected rate of return on HP's stock?

A: The capital asset pricing model is used to determine the predicted return. It creates a connection…

Q: Beta Expected Return ABC 1.05 XYZ 0.90 Suppose you observe the following situation: Assume these…

A: In the given case, beta  and the expected return of each security is given. So, the risk free rate…

Q: hat would the expected annual return

A: The Capital Asset Pricing Model (CAPM) was developed by William F. Sharpe. The expected return and…

Q: Suppose the CAPM holds. You know that the average investor has a degree risk aversion of 3.3. The…

A: CAPM The capital asset pricing method or CAPM is an approach that specifies that the rate of return…

Q: Please help me with 11-5 ??‍♀️

A:

Q: The risk-free rate is 3.1 percent and the market expected return is 12.2 percent. What is the…

A: Risk free rate = rf = 3.1%Market return = mr = 12.2%Beta = b = 1.16

Q: A stock has a beta of 1.32, the expected return on the market is 10 percent, and the risk-free rate…

A: A stock is a financial instrument issued by a corporation to obtain equity funds. The required rate…

Q: The risk-free rate is 4%%. The market risk-premium is 79%. The beta is 20. What is the expected rate…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: 16. Using CAPM [LO4] A stock has an expected return of 11.85 percent, its beta is 1.24, and the…

A: Risk free return can be calculated with CAPM equation E(R) =Rf+ beta(Rm -Rf) Where E(R)=Expected…

Q: Required Rates of Return Suppose that the risk-free rate is 5% and that the market risk premium is…

A: To calculate the required return we will use the below  formula   Required return = Risk free…

Q: Assuming that the CAPM approach is appropriate, compute the required rate of return for each of the…

A: Given: Risk free rate = 0.07 Market rate = 0.13 Different betas:

Q: Assume that the risk-free rate is 4% and the expected return on the market is 11.5%. What is the…

A: The Capital Asset Pricing Model (CAPM) is a tool used in finance to estimate the cost of equity,…

Q: The risk-free rate (rar) is 9 percent and the required return on market is 12 per Which one best…

A: Stocks refers to the multitude of shares by which ownership of a partnership or organization is…

Q: 4. Suppose risk-free rate of return = 2%, market return = 7%, and Stock B’s return = 11%. a.…

A: Using CAPM

Q: 4. Suppose Walmart stock and the market portfolio have the following characteristics: Rm=8%,…

A: Beta is the risk of the stock subject to market. By using CAPM, the expected fundamental value of…

Q: Assume that the risk-free rate is 6% and the required return on the market is 10%. What is the…

A: The formula used as follows: Required rate of return=rRF+Beta rM-rF

Q: 1. What must be the beta of a portfolio with E(rp) = 18%, if rƒ= 6% and E(rm) = 14%?

A: According to bartleby guidelines, if multiple questions are asked , then 1 st question needs to be…

Q: Suppose there are two stocks, one with expected return of 14% with a beta of 1 and the other with…

A: The expected rate of return is the return that an investor expects the company to generate out of…

Q: REQUIRED RATE OF RETURN (Percent) 20.0 16.0 12.0 8.0 4.0 0.5 1.2, 10.4 1.0 RISK (Beta) CAPM Elements…

A:

Q: Reward-to-Risk Ratios [LO4] Stock Y has a beta of 1.3 and an expected return of 18.5 percent. Stock…

A: Here, Risk-free rate = 8% Market risk premium = 7.5% Stock Y: Beta = 1.3 Expected return = 18.5%…

Q: Problem 8.13 (CAPM, Portfolio Risk, and Return) Consider the following information for stucks A, B,…

A: a.A mixture of different kinds of funds and securities for the investment is termed as the…

Q: Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a…

A: We are given following details : Expected return on market = 18% Beta = 1.2 Expected return on stock…

Q: [Questions 15-16] The stock is expected to pay a dividend of $0.8 per share in year 1. Since then,…

A: beta = b = 1.5 Risk free rate = rf = 2% market risk premium = mrp = 6%

Q: Q21. Suppose your expectations regarding the stock price are as follows: Time Return 1 0.10 2 -0.15…

A:

Q: 4. Assume that the risk-free rate is 5% and the expected return on the market is 12%. What is the…

A: In the given question we are required to calculate required rate of return of stock using given…

Q: 11.4. Consider the following information: Standard Deviation Beta Security T 30% 1.90 Security K 30%…

A: Financial securities are the financial instruments and financial assets that are traded in the…

Q: None

A: To find the market risk premium and the expected rate of return on the market using the Capital…

Q: Chapter 6, Problem 14: Assume the data for two stocks, X and Y, are given below. Could the…

A: Expected return on Stock A (ErA) = 8%Expected return on Stock B (ErB) = 13%Standard deviation of…

Q: A stock as a beta of 0.9 and the market expects to return 12.0%. If the risk free rate is 2.0%, what…

A: CAPM is the capital assets pricing model used to calculate the required rate of return based on the…

Q: you observe the following situation: Security Peat Company Re-Peat Company Beta 1.70 0.85 Expected…

A: As per CAPM,Required return = Rf+[β∗MRP]Where Rf = risk free rateβ = BetaMRP = Market risk…

Q: Give me three steps solution and explanation

A: To find the reward-to-risk ratio of Stock B, we first need to understand that the reward-to-risk…

Q: A discrete-time financial market has two risky securities, whose prices are S1 (0) = Question 1. 10…

A: Data given: At t=0 Portfolio is worth = 100 w1 = 30% w2 = 70% Price S1(0) = 10 Price S2(0) = 20 At…

Q: 4m

A: CAPM shows the relationship between the expected return, the market return, the risk-free return,…

Q: A stock has a beta of 1.15, the expected return on the market is 11.1 percent, and the risk-free…

A: Expected Return on this stock = Risk free rate + beta * (market return - risk free rate)

Q: O Stock X has a 9.0% expected return, a beta coefficient of 0.7, and a 40% standard deviation of…

A: ParticularsStock XStock YExpected return9%12%Beta0.701.10Standard deviation40%30.0%Risk-free…

Q: A2) The risk-free rate of return is 2.8 percent, the inflation rate is 3.1 percent, and the market…

A: Answer  Formula for  Expected Return : ER  ER  = Rf + beta ( Rm - Rf )

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.