Question
A firm has a required return of 14.2% and a beta of 1.63. If the risk-free rate is currently 5.4%, what is the expected return
A firm has a required return of 14.2% and a beta of 1.63. If the risk-free rate is currently 5.4%, what is the expected return to the market? Assume that CAPM is correct.
5.40%
1.07%
8.80%
11.87%
10.80%
I am not sure what I did wrong 5.4%+1.63 (14.2%-5.4%) this is how I set it up but did not get the right answer.
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Financial Management for Public, Health and Not-for-Profit Organizations
Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell
5th edition
1506326846, 9781506326863, 1506326862, 978-1506326849
