Question

Use the required return-beta equation from the CAPM.

1. What is the required return if the risk-free rate is 3%, beta 1.5 and the required return for the market portfolio is 8%?

2. What is the risk-free rate if beta is 1.1, the required return 8.4% and the required return for the market portfolio is 8%?

3. What is beta if the risk-free rate is 3%, the required return 10% and the required return for the market is 8%?

4. What is the required return for the market if the risk-free rate is 3%, beta 1.5 and the required return 10%?

Answer #1

**1. The required return is computed as
follows:**

**= risk free rate + beta x (return on market - risk free
rate)**

= 0.03 + 1.5 x (8% - 3%)

**= 10.5%**

**2. The risk free rate is computed as
follows:**.

0.084 = risk free rate + 1.1 x (0.08 - risk free rate)

0.084 = risk free rate + 0.088 - 1.1 risk free rate

**risk free rate = 4%**

**3. Beta is computed as follows:**

0.10 = 0.03 + beta x (0.08 - 0.03)

**Beta = 1.4**

**4. Return on market is computed as follows:**

0.10 = 0.03 + 1.5 x (return on market - 0.03)

0.07 = 1.5 return on market - 0.045

**return on market = 7.67% Approximately**

Manipulating CAPM Use the basic equation for the capital asset
pricing model (CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 0.54
when the risk-free rate and market return are 6 % and 8 % ,
respectively.
b. Find the risk-free rate for a firm with a required return
of 6.368 % and a beta of 0.26 when the market return is 11 % .
c. Find the market...

Use the basic equation for the capital asset pricing
model(CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 1.51
when the risk-free rate and market return are 8% and 10%
respectively.
b. Find the risk-free rate for a firm with a required return of
9.791% and a beta of 0.97 when the market return is 10%.
c. Find the market return for an asset with a required return of...

a. (Required Rate of Return Using CAPM) Compute a fair rate of
return for Apple
common stock, which has a 1.5 beta. The risk-free rate is 8 percent
and the
market portfolio (New York Stock Exchange stocks) has an expected
return of
16 percent.
b. Why is the rate you computed a fair rate?

Manipulating CAPM???Use the basic equation for the capital asset
pricing model ?(CAPM?) to work each of the following problems.
a.??Find the required return for an asset with a beta of 0.810.81
when the? risk-free rate and market return are 99?% and 17 %17%?,
respectively. b.??Find the ?risk-free rate for a firm with a
required return of 12.98212.982?% and a beta of 1.891.89 when the
market return is 10 %10%. c.??Find the market return for an asset
with a required return...

What is the CAPM required return of a portfolio with 40%
invested in the market portfolio, 18% invested in risk-free assets,
and the rest invested in a stock with a beta of 2.3? The risk free
rate is 0.8% and the expected market risk premium is 5.8%. Answer
in percent, rounded to two decimal places.

Use the basic equation for the capital asset pricing model
(CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 0.84
when the risk-free rate and market return are 77% and 15 %
respectively.
b. Find the risk-free rate for a firm with a required return of
7.394% and a beta of 1.16 when the market return is 7 %.
c. Find the market return for an asset with a...

1.) According to the CAPM, what is the expected return on a
security given a market risk premium of 9%, a stock beta of 0.57,
and a risk free interest rate of 1%? Put the answers in decimal
place.
2.) Consider the CAPM. The risk-free rate is 2% and
the expected return on the market is 14%. What is the expected
return on a portfolio with a beta of 0.5? (Put answers
in decimal points instead of percentage)
3.) A...

A- The CAPM says that the average return on a stock should be at
least the return on a riskless asset and compensation for
bearing
choose one of the following:
1-firm-specific risk. 2-market risk. 3-firm-specific and market
risk. 4-alpha risk. 5- beta risk. 6- alpha and beta risks.
B- Since the market portfolio beta is equal to
---------------------a stock with a beta of 1.00
is---------------------the market portfolio.
choose two of the following for each blink:
1- 0 2- 1 3-100...

Suppose the required rate of return on a stock with Beta 1.2 is
18 per cent and risk free rate is 6 per cent. According to the
CAPM
a) What is the expected rate of return on the market
portfolio?
b) What is the expected rate of return of a zero-beta
security?
c) Suppose you select Stock ABC for Rs. 50 and the stock is
expected to pay a dividend of rs. 2 next year and is expected to
fetch...

CAPM AND PORTFOLIO RETURN
You have been managing a $5 million portfolio that has a beta of
2.00 and a required rate of return of 10%. The current risk-free
rate is 3.50%. Assume that you receive another $500,000. If you
invest the money in a stock with a beta of 1.90, what will be the
required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.
%

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 11 minutes ago

asked 15 minutes ago

asked 15 minutes ago

asked 17 minutes ago

asked 17 minutes ago

asked 17 minutes ago

asked 18 minutes ago

asked 18 minutes ago

asked 20 minutes ago

asked 20 minutes ago

asked 24 minutes ago

asked 36 minutes ago