Compute the expected rate of return for Acer common stock, which has a 1.8

beta. The risk-free rate is 5 percent and the market portfolio (composed of New York Stock Exchange stocks) has an expected return of

14 percent.

b.Why is the rate you computed the expected rate?

a.The expected rate of return for Acer common stock is

nothing%.

(Round to one decimal place.)

b.Why is the rate you computed the expected rate?

The rate is fair and expected because the CAPM provides a theory of how risk and expected return are connected or traded off in the capital markets.

True

False

(Select from the drop-down menu.)