Calculate the return on retained earnings using the Capital Asset Pricing Model (CAPM): Risk-free rate of return

Question:

Calculate the return on retained earnings using the Capital Asset Pricing Model (CAPM):

Risk-free rate of return ................................5%

Return on market portfolio .........................17%

Firm-specific risk fact ................................1.25

Capital Asset Pricing Model
The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. The CAPM is a model for pricing an individual security or portfolio. For individual securities, we make use of the security market line (SML) and its... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...