Question
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)?
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Cornerstones of Financial Accounting
Authors: Jay Rich, Jeff Jones
4th edition
978-1337690881, 9781337669450, 1337690880, 1337690899, 1337669458, 978-1337690898
