Question
Here are data on two companies. The T-bill rate is 6.0% and the market risk premium is 7.7%. Company $1 Discount Store Everything $5 Forecast
Here are data on two companies. The T-bill rate is 6.0% and the market risk premium is 7.7%.
| Company | $1 Discount Store | Everything $5 |
| Forecast return | 15% | 14% |
| Standard deviation of returns | 18% | 20% |
| 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 | % | ||
|
| |||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
11th Edition
1259277178, 978-1259277177
