Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose CAPM works, and you know that the expected returns on Google and IBM are estimated to be 12.75% and 9.25%, respectively. You have just
Suppose CAPM works, and you know that the expected returns on Google and IBM are estimated to be 12.75% and 9.25%, respectively. You have just calculated extremely reliable estimates of the betas of Google and IBM to be 1.45 and 0.87, respectively. Given this data, what is a reasonable estimate of the market risk-premium in percentage (the average/expected difference between the market return and the risk-free rate)? (Allow two decimals in the percentage but do not enter the % sign.)
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