7 The Capital Asset Pricing Model (CAPM). Using the capital asset pricing model

(CAPM) equation calculate the following:

(a) The required return on share A, R(rA), if the risk-free rate Rf is 5 per cent, the market return, ERm is 10 per cent and the share’s beta, βA, is 1.25.

(b) The market return ERm if the risk-free rate Rf is 7 per cent, the required return on share B is 16 per cent and the share’s beta, βB, is 0.75.

(c) The beta on share C, βC, if the risk-free rate Rf is 8 per cent, the market return ERm is 17 per cent and the required return R(rC) is 20 per cent.

(d) The risk-free rate Rf if the required return on share D, R(rD), is 17 per cent, the market return, ERm is 18 per cent and the share’s beta, βD, is 0.9.