Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Asset W has an expected return of 21.3 percent and a beta of 2.05. If the risk-free rate is 3.5 percent, what is the market

Asset W has an expected return of 21.3 percent and a beta of 2.05. If the risk-free rate is 3.5 percent, what is the market risk premium? I am using formula Expected return = risk free rate + beta * (market risk premium-risk free rate ). I do know that it is not correct, and the formula has to be Expected return = risk free rate + beta * (market risk premium)

Can somebody explain me why? Thanks.

P.S. correct answer is 8.68292683

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Teaching Public Budgeting And Finance

Authors: Meagan M. Jordan, Bruce D. McDonald III

1st Edition

1032146680, 978-1032146683

More Books

Students also viewed these Finance questions

Question

=+2.4. Let F1, F2, ... be classes of sets in a common space 2.

Answered: 1 week ago