Beta coefficients and the capital asset pricing model Suppose you are wondering how much risk you must undertake to generate an acceptable return on your investment portfolio. The risk-free return currently is 3%. The return on the overall stock market is 12%. Use the CAPM to calculate how high the beta coefficient of your investment portfolio would have to be to achieve each of the following expected portfolio returns.
a. 13%
b. 25%
c. 16%
d. 18%
e. Assume you are averse to risk. What is the highest return you can expect if you are unwilling to take more than an average risk?