Question

The Treasury bill rate is 3.3%, and the expected return on the market portfolio is 10.3%. Use the capital asset pricing model.

a. What is the risk premium on the market? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Risk premium             %

b. What is the required return on an investment with a beta of 1.7? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Required return             %

c. If an investment with a beta of .88 offers an expected return of 7.9%, does it have a positive NPV?

	Yes
	No

d. If the market expects a return of 11.4% from stock X, what is its beta? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Beta _____________

Answer 1