Question
A stock has a beta of 1.25, the risk-free rate is 0.10%, and the expected return on the market is 8 percent. Using the CAPM,
A stock has a beta of 1.25, the risk-free rate is 0.10%, and the expected return on the market is 8 percent. Using the CAPM, what would you expect the required rate of return on this stock to be? What is the market risk premium?
Answer: ki = 9.975%; MRP = 7.9%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Introduces Quantitative Finance
Authors: Paul Wilmott
2nd edition
470319585, 470319581, 978-0470319581
