Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm - Rf) is 8%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28, then this stock's expected return should be A) 10.53% B) 14.24% 23.15% D) 6.59%

Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm - Rf) is 8%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28, then this stock's expected return should be A) 10.53% B) 14.24% 23.15% D) 6.59%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 20P

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Question

Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm - R;) is 8%. If use the
Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28,
then this stock's expected return should be
A)
10.53%
B)
14.24%
23.15%
6.59%

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