1. Assume that the risk-free rate is 5% and the market portfolio has an expected return of 13% with volatility of 18%. Monsters Inc. has a volatility of 24% and a market correlation of .60, while California Gold Mining has a volatility of 32% and a market correlation of -.7. Assume that the CAPM assumptions hold.

calculate California Gold Mining's required return .

Answer rating: 100% (QA)

SOLUTION The CAPM formula is Expected return on security Riskfree rate Beta x Expected market return ... View the full answer