Company XYZ has a CAPM beta of 1.5. The expected return on the market is 20% and the risk-free rate of return is 5%. According to CAPM, what should be the company XYZ's expected return? (b) Company ABC has a CAPM beta of 1.2. The expected market premium is 14% and the risk-free rate of return is 3.8%. According to CAPM, what should be the company ABC's expected return?
Company XYZ has a CAPM beta of 1.5. The expected return on the market is 20% and the risk-free rate of return is 5%. According to CAPM, what should be the company XYZ's expected return? (b) Company ABC has a CAPM beta of 1.2. The expected market premium is 14% and the risk-free rate of return is 3.8%. According to CAPM, what should be the company ABC's expected return?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Help
Transcribed Image Text:Company XYZ has a CAPM beta of 1.5. The expected
return on the market is 20% and the risk-free rate of
return is 5%. According to CAPM, what should be the
company XYZ's expected return? (b) Company ABC has
a CAPM beta of 1.2. The expected market premium is
14% and the risk-free rate of return is 3.8%. According
to CAPM, what should be the company ABC's expected
return?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education