Question

1a)Calculate the expected return for B Services which has a beta of 0.83 when the risk...

1a)Calculate the expected return for B Services which has a beta of 0.83 when the risk free rate is 0.05 and you expect the market return to be 0.12.

B) Calculate the expected return for D Industries which has a beta of 1.0 when the risk free rate is 0.03 and you expect the market return to be 0.13.

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Answer #1

The expected return is calculated as per CAPM :

Expected return = risk free rate + (Beta*(Expected return on market - risk free rate))

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