Question
Here are data on two companies. The T-bill rate is 5.8% and the market risk premium is 7.4%. Company $1 Discount Store Everything $5 Forecast
Here are data on two companies. The T-bill rate is 5.8% and the market risk premium is 7.4%.
| Company | $1 Discount Store | Everything $5 |
| Forecast return | 14% | 13% |
| Standard deviation of returns | 17% | 19% |
| Beta | 1.7 | 1 |
What would be the fair return for each company, according to the capital asset pricing model (CAPM)?(Round your answers to 2 decimal places.)
| Company | Expected Return |
| $1 Discount Store | % |
| Everything $5 | % |
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Quantitative Investment Analysis
Authors: Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle
3rd edition
111910422X, 978-1119104544, 1119104548, 978-1119104223
