Consider the CEO of Zeus Engineering who knows very well how to use the Bloomberg Terminals and download the most contemporary data for the global financial markets. He calculates the historical returns by employing the CAPM MODEL.

Consider the following table and assist him in order to estimate the following relationships for Kronos (K) and Titan (T) MNEs.

YEAR Return (K)

2017 24%

2018 29%

2019 -6%

2020 13%

2021 22%

Return (T)

13% 17% 15% 14% 11%

R Market

22% 10% 12% 19% 15%

Assume that the Risk-Free Rate is 4%

1. What are the betas of stocks K and T respectively?

2. What are the required rates of return for stocks K and T?

3. Are stocks for companies K and T aggressive or defensive stocks?

4. What is the Risk Premium for stocks K and T respectively?

5. Do you like the CAPM model? Why?