In evaluating CAPM for XOM stock I used a 4% risk free rate and an expected return rate of 12%. The beta for the XOM stock was found using yahoo finance and it is 1.27. In order to find CAPM using the formula provided E(Ri)=Rf+[E(Rm)-Rf}]*B

First we would input the risk free rate, expected return rate and the beta that was found.

E(Ri)= .04+(.12-.04)1.27 = .04+ (.08*1.27)= .1416

CAPM would be 14.16% which would mean that there should be a 14% return because of the risk associated with XOM stock.

A beta less than one means that the stock is less volatile than the market and a beta greater than one means that the stock is more volatile than the market. A beta less than zero means that the stock is losing money while the market is gaining money. The beta of the stock for XOM says that the stock is more volatile, so there are more price fluctuations associated with the stock, making it a risky investment. I feel that the prediction of the CAPM would be reasonable because there is a greater return because of the risk associated with the stock. With a CAPM of 14% there is more risk but there is also more expected returns that go along with that risk. There might some vulnerability because of the way that the market is and because of the fluctuations in the stock market as well.

PLEASE REPLIED THIS ABOUT 100-150 WORD AND SHOULD RAISE THE LEARNING OUTCOME OF THE WHOLE CLASS BY MAKING THROUGH PROVOKING AND ASK INSIGHFUL QUESTION AND COMMENT