9. CAPM (S8.2) The Treasury bill rate is 4%, and the expected return on the market portfolio...

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9. CAPM (S8.2) The Treasury bill rate is 4%, and the expected return on the market portfolio is 12%. Using the CAPM:

a. Draw a graph similar to Figure 8.3 showing how the expected return varies with beta.

b. What is the risk premium on the market?

244 Part Two Risk

c. What is the required return on an investment with a beta of 1.5?

d. If an investment with a beta of 0.8 offers an expected return of 9.8%, does it have a positive NPV?

e. If the market expects a return of 11.2% from stock X, what is its beta?

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Principles Of Corporate Finance

ISBN: 9781264080946

14th Edition

Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans

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Question Posted: Jul 31, 2024 08:00 AM

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9. CAPM (S8.2) The Treasury bill rate is 4%, and the expected return on the market portfolio...

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