Answered: Consider the CAPM. The risk - free…

Consider the CAPM. The risk - free rate is 4%, and the expected return on the market is 15% . What is the expected return on a stock with a beta of Training 1.2?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 14P: You have observed the following returns over time: Assume that the risk-free rate is 6% and the...

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Question

Consider the CAPM. The risk -

free rate is 4%, and the

expected return on the market is

15% . What is the expected

return on a stock with a beta of

Training

1.2?

Definition Definition Model that illustrates the correlation between the expected return and risk of capital investment in stock. According to this model, the expected rate of return on equity is equal to the risk-free return added to a risk premium, which is based on the stock beta.

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