The firm's beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM?

Q: Assuming the CAPM or one-factor model holds, what is the cost of equity for a firm if the firm's…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: Calculate the union’s cost of equity from the CAPM using its own beta (0.90) estimate and the…

A: Risk Free Rate = 0.02 Market Risk Premium = 0.07   Union Beta = 0.90 Industry Beta = 1.25

Q: The CRT Co. has a beta of 1.6 The expected market return is 9.5 percent and the risk free rate of…

A: Given that;Expected market return is 9.5%Risk free rate is 3.2%Beta is 1.6

Q: According to CAPM estimates, what is the cost of equity for a firm with a beta of 1.5 when the…

A: In the given question we are require to calculate the cost of equity for the firm using CAPM.

Q: If the risk-free rate is 10.2% and the market risk premium is 4.4%, what is the required return for…

A: In the Given question we require to calculate the required return for the market from the following…

Q: If the expected rate of return on AZNG is 12.72, its beta is 1.09 and the market risk premium is 8%,…

A: The objective of the question is to find the risk-free rate given the expected rate of return on a…

Q: Your estimate of the market risk premium is 5%. The risk-free rate of return is 3%, and General…

A: General Motors has the following given details:Market Risk premium (Rm-Rf) = 5%Risk free rate (Rf)=…

Q: The market risk premium is 5%. The firm has an estimated beta of 0.9 and the current risk free rate…

A: Given Information : Market risk premium = 5%Beta = 0.9 Risk free rate = 3%

Q: Suppose that the borrowing rate that your client faces is 9%. Assume that the equity market index…

A: Computation:

Q: The current risk-free rate of return is 4.6%. The market risk premium is 6.6%. D'Amico Co. has a…

A: As per CAPM  Cost of equity = Risk free rate + beta * Market risk premium

Q: Dhofar Energy Services has a Beta = 1.18 The risk-free rate on a treasury bill is currently 4.4% and…

A: As per Capital Asset Pricing Model(CAPM) Cost of equity = Risk Free Rate + (Market Return -Risk Free…

Q: If risk free rate is 2%, market risk premium (also called the equity risk premium) is 5%, and a…

A: Cost of equity is the cost in percentage that is used to raise the company’s equity funds.

Q: The company has a beta of 0.85. If the risk-free rate is 3.4% and the market premium is 8.5%, what…

A: Beta of stock = 0.85 Risk free rate = 3.4% Market premium = 8.5% From this information we need to…

Q: Assume a firm has a beta of 1.2. All else held constant, the cost of equity for this firm will…

A: Given: A firm has the beta value of 1.2

Q: Calculate return on equity using CAPM Risk-Free Rate = 2% Market Return = 8% Beta = 1.5

A: The cost of capital is considered as the cost incurred in terms of issuing funds for the company.…

Q: Dhofar Silicon Services has a B(Beta)= 1.4.The risk free rate on a treasury bill is currently 8.2%…

A: The Correct option is OPTION-C. This problem is related to Capital Asset Pricing Model (CAPM)…

Q: Walmart's beta is 0.7. The market risk premium is 4.2 %. The appropriate risk-free rate is 0.04 %.…

A: Given information: Beta : 0.7 Market risk premium : 4.2% Risk free rate : 0.04%

Q: If a firm's beta is 1.1, the risk-free rate is 6%, and the expected return on the market is 14%,…

A: Details given are : Beta = 1.1 Risk free rate = 6% Expected market return = 14% We need to compute…

Q: The current risk-free rate of return (rRf) is 4.67% while the market risk premium is 5.75%. The…

A: According to the CAPM model the cost of equity is the sum of the risk free rate plus the product of…

Q: Suppose the market risk premium is 4.0 % and the risk-free interest rate is 3.0%. Use the data below…

A: Given details are : Market risk premium = 4% Risk free rate = 3% Beta = 2.28 From above details we…

Q: Chipotle's beta is 0.95, the current risk-free rate is 2% and the market risk premium is 7%. What is…

A: We are require to calculate the Chipotle's cost of equity: Cost of equity can be calculated using…

Q: Consider the following information for Vine Inc.: Beta: 1.39 Risk-free rate: 7% Market Risk Premium:…

A: According to Capital asset pricing model ( CAPM), ke = Rf  + [beta × ( Rm - Rf)] Where, ke = cost of…

Q: Your estimate of the market risk premium is 8%. The risk−free rate of return is 3.1% and General…

A: CAPM refers to the relationship between the expected return of the stock and the risk associated…

Q: If the firm's beta is 1.75, the risk-free rate is 8%, and the average return on the market is[12%,…

A: Risk free rate = 8% Market return = 12% Beta = 1..75

Q: Dhofar Energy Services has a Beta = 1  The risk-free rate on a treasury bill is currently 4.4% and…

A: By Capital asset pricing model: Cost of equity = Rf + ß*(Rm - Rf) Rm = (Cost of equity - Rf)/ß + Rf

Q: A firm's stock has a beta of 1.7. The expected T-bill return is 3.7%. and the expected market return…

A: Risk-free rate(expected T-bill return) = 3.7%Beta = 1.7Expected market return = 7%

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return ABC Inc. has 1.8 Beta and .2…

A: Given Information ABC Inc. Beta = 1.8 Expected Return of ABC Inc. =0.2 XYZ Inc beta =1.6 Expected…

Q: Walmart's beta is 0.7. The market risk premium is 4.2 %. The appropriate risk-free rate is 0.04 %.…

A: Given information: Beta : 0.7 Market risk premium : 4.2% Risk free rate : 0.04%

Q: Using the Capital Asset Pricing Model (CAPM), what's this company's cost of common equity? Expected…

A: In the given question we are required to calculate Company's cost of common equity using Capital…

Q: The current risk-free rate of return is 4.67%, while the market risk premium is 6.63%. The D'Amico…

A: In the given question we need to compute the D'Amico's cost of equity using Capital asset pricing…

Q: Amazon has a beta of 0.6. The risk-free rate is 1.2% and the expected return on the S&P500 is 6%.…

A: If Capital Asset Pricing Model Hold Good, Cost of Equity  = Risk Free Rate  + (Market Rate - Risk…

Q: A firm has a beta of 0.6. If the return on the market is 9% and the risk-free return is 2%, then…

A: The firm's required return is computed using the Capital Asset Pricing Model(CAPM).

Q: A public firm’s beta is 1.5. The expected market return is 5%, risk-free rate is assumed to be 1%…

A: The capital Asset pricing model describes the relationship between systematic risk and the expected…

Q: The expected rate of return on a market portfolio is 7 percent. The riskless rate of interest is 4…

A: required rate of return = risk free rate + beta * (market return less risk free rate)

Q: assume that the risk free interest rate is 3%, the market rate of return is 7% and the beta for the…

A: As per CAPM, Required rate of return = Risk free Rate + Beta * (Market Return - Risk free Rate)

Q: Dhofar Energy Services has a Beta = 0.69 The risk-free rate on a treasury bill is currently 4.4% and…

A: The formula used is shown:

Q: The current beta for The Garner Company is 1.6. The risk-free rate of return is 3%, whereas the…

A: Current beta = 1.6 Risk free rate (Rf) = 3% Market risk premium (Rm - Rf) = 7%

Q: Compute Bowling Avenue Inc.'s required rate of return given a beta of.9, risk free rate of 3.25%,…

A: Calculation of required rate of return:Answer:The required rate of return is 8.425%

Q: The risk-free rate is 3%, the market risk premium (MRP) is 8%, and the Beta of Lotsa Dough common…

A: Risk free rate = 3% Market risk premium = 8% Beta = 0.90

Q: Dhofar Energy Services has a Beta = 0.93 The risk - free rate on a treasury bill is currently 4.4%…

A: Given: Beta =0.93Risk free rate(Rf) =4.4%Cost of equity(Ke) =20.70%

Q: Your estimate of the market risk premium is 5%. The risk-free rate of return is 2% and General…

A: Cost of Equity refers to annual cost that is incurred by entity for having equity in their capital…

Q: Suppose the beta of this value based company is 0.85, the risk-free rate is 2 percent, and the…

A: The capital asset pricing model is used for calculation of expected rate of return on the basis of…

Q: Your estimate of the market risk premium is​ 6%. The​ risk-free rate of return is​ 4% and General…

A: The objective of the question is to calculate the cost of equity capital for General Motors. The…

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.