Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

CAPM and Required Return Calculate the required rate of return for XYZ, Inc. using the following infomration: The investors expect a 3.0% rate of inlation,

CAPM and Required Return

Calculate the required rate of return for XYZ, Inc. using the following infomration:

The investors expect a 3.0% rate of inlation, the real risk-free rate is 2.0%, the market risk premium is 6.0%. XYZ Inc. has a beta of 1.7. Over the past 5 years, the realized rate of return has average 13.0%.

nominal Rf w/inflation 5.06% =(1+.02)*(1+.03)-1
required rate of return 5.16% =.0506+(.0170*.06)

Is this correct?

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

Step: 3

blur-text-image

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

Financial Institutions Management

Authors: Anthony Saunders

3rd Edition

007303259X, 978-0073032597

More Books

Students also viewed these Finance questions

Question

f. Did they change their names? For what reasons?

Answered: 1 week ago