Question
Here are data on two companies. The T-bill rate is 4.2% and the market risk premium is 5.0%. Company $1 Discount Store Everything $5 Forecast
Here are data on two companies. The T-bill rate is 4.2% and the market risk premium is 5.0%.
| Company | $1 Discount Store | Everything $5 |
| Forecast return | 12% | 11% |
| Standard deviation of returns | 9% | 11% |
| Beta | 1.5 | 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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Financial Management Principles And Applications
Authors: Sheridan Titman, John Martin
14th Global Edition
1292349824, 978-1292349824
