Use the following information to answer the question(s) below. Year 2007 2008 2009 Risk-free Return 2.5% 1.6% 1.4% Market Return 6.0% -38.5% 22.5% Wyatt Oil Return 5.5% -32.6% 19.6% Beta 0.833 0.853 0.865 Wyatt Oil's average historical excess return is closest to (%) (2 decimal places):

Use the following information to answer the question(s) below. Year 2007 2008 2009 Risk-free Return 2.5% 1.6% 1.4% Market Return 6.0% -38.5% 22.5% Wyatt Oil Return 5.5% -32.6% 19.6% Beta 0.833 0.853 0.865 Wyatt Oil's average historical excess return is closest to (%) (2 decimal places):

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

8th Edition

ISBN:9781285065137

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter9: Stocks And Their Valuation

Section: Chapter Questions

Problem 4DQ

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Concept explainers

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.

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