Question
Here are data on two companies. The T-bill rate is 4.8% and the market risk premium is 9.2%. Company $1 Discount Store Everything $5 Forecast
Here are data on two companies. The T-bill rate is 4.8% and the market risk premium is 9.2%.
| Company | $1 Discount Store | Everything $5 |
|---|---|---|
| Forecast return | 16% | 15% |
| Standard deviation of returns | 23% | 25% |
| Beta | 1.4 | 1.0 |
a. What would be the expected rate of return for each company ($1 Discount Store, Everything $5), according to the capital asset pricing model (CAPM)? (Round your answers to 2 decimal places.)
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Monetary Policy Strategy
Authors: Frederic S. Mishkin
1st Edition
0262513374, 978-0262513371
