The market risk premium is 10% and the risk-free rate is 4%, beta of the stock is 0.75, then Expected return under the CAPM is a. 8.5 percent b. 7 percent c. 6.35 percent d. 11.5 percent

Q: Suppose the common stock of United Industries has a beta of 1.09 and an expected return of 13.9…

A: Introduction: When it comes to the stock market, investors need to understand every term and phrase.…

Q: These fact relate to Cornerstone Unlimited.   The risk-free rate of return is 5 percent and the…

A: RISK FREE RATE = 5% MARKET RISK PREMIUM = 12% BETA = 1.40 MARKET RISK PREMIUM = (MARKET RETURN -…

Q: Stock A has a risk premium of 5.6 percent. If Treasury bills yield 2.3 percent and the expected…

A: The evaluation of the systematic risk or volatility of a stock or the portfolio as compared to the…

Q: The required rate of return on the Cosmos Corporation's common stock is 10%, the current real rate…

A:

Q: The risk-free rate of return is currently 0.02, whereas the market risk premium is 0.05. If the beta…

A: Given information: Risk free rate of return is 0.02 Market risk premium is 0.05 Beta value of stock…

Q: A stock has an expected return of 11 percent, the risk-free rate is 6.1 percent, and the market risk…

A: Beta: The volatility of a stock in relation to the entire market is measured by its beta. Individual…

Q: Paycheck, Inc. has a beta of 1.19. If the market return is expected to be 13.50 percent and the…

A: Risk Premium:  It is the investment return amount assets are expected to yield in excess of the…

Q: The risk-free rate of interest is 2.1% and the market return is 9%. Howard Corporation has a beta of…

A: Risk free rate (Rf) = 0.021 Market return (Rm) = 0.09 Beta (b) = 1.75 Required return = ?

Q: Beta and required rate of return A stock has a required return of 11 percent; the risk-free rate is…

A: In the given question we require to compute the beta of stock from below details : Required return =…

Q: A stock has an expected return of 7.8 percent. The expected return on the market is 9 percent and…

A: Beta less than 1 signifies less systematic risk.

Q: The risk-free rate of return is 3.7 percent and the market risk premium is 6.2 percent. What is the…

A: The given question can be solved using capital asset pricing model (CAPM)

Q: CEPS Group stock has a beta of 1.05. The risk-free rate of return is 5.25 percent and the market…

A: Beta = 1.05 Risk free rate = 5.25% Market risk premium =9%

Q: the returns on Magee companys stock have a standard deviation of 30% and a correlation with the…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: Stock A has a beta of 0.87 and an expected return of 9.21 percent. Stock B has a beta of 1.36 and an…

A: Expected return as per CAPM = Risk free rate + Beta * Market risk premium

Q: Assume the expected return on the market is 14 percent and the risk-free rate is 4 percent. What is…

A: The risk premium is the difference between the expected market rate and the risk-free rate. It is…

Q: A stock has an expected return of 13.4 percent, its beta is 1.60, and the risk-free rate is 5.5…

A: We require to compute the expected market return (Rm) from following details : Expected return on…

Q: Stock A has an expected return of 10 percent and a beta of 1.0. Stock B has a beta of 2.0. Portfolio…

A: CAPM stands for capital asset pricing model. It explains the relationship between systematic risk…

Q: Stock Y has a beta of 1.35 and an expected return of 14.30 percent. Stock Z has a beta of 0.75 and…

A: Formula: Expected return = Risk free rate + (Beta*Market risk premium)

Q: Currently the risk-free return is 3 percent and the market risk premium is 8 percent. What is the…

A: Risk-free rate = 3% Market risk premium = 8% According to CAPM: Required return = Risk-free rate +…

Q: Using the CAPM, estimate the appropriate required rate of return for the three stocks listed here,…

A: In the given question we are required to calculate the Required rate of return of three stocks i.e.…

Q: A stock has an expected return of 14 percent, a beta of 1.65, and the expected return on the market…

A: Given that the expected return on a stock is 14%, expected return on the market is 11.2% and the…

Q: The common stock of Peeta Inc. has an expected return of 15.0%, the risk-free rate is 3.20%, and the…

A: The return which a company decides as a cost if an investment meets its capital requirement is…

Q: The stock of World's Best Pizza has a beta of 1.50 and an expected return of 12.60 percent. The…

A: BETA = 1.50 EXPECTED RETURN = 12.60%  RISK FREE RATE = 5.10%

Q: Stock A has a beta of 1.5, the risk-free rate is 4% and the return on the market is 9%.  If…

A: Required rate of return is the minimum rate that an investor expects from their investment over the…

Q: Jerilu Markets has a beta of 1.05. The risk-free rate of return is 2.64 percent and the market rate…

A: Introduction:- Risk  premium is the excess return over the guaranteed rate of return. It is more…

Q: The risk-free rate is 6 percent and the expected market risk premium is 8 percent. What is the…

A: Following details are given to us in the question : Risk free rate (Rf) = 6% Beta (B) = 0.7 Market…

Q: CEPS Group stock has a beta of 0.95. The risk-free rate of return is 3.75 percent and the market…

A:

Q: Currently, the risk-free return is 4 percent, and the expected market rate of return is 11 percent.…

A: In this we have to calculate the beta of portfolio and from that we will get expected return of…

Q: Snow Fooling stock has an expected return of 8.17 percent and its reward-to-risk ratio is 6.9…

A:

Q: A stock has an expected return of 12.25 percent.  The beta of the stock is 1.15 and the risk-free…

A: The market risk premium can be calculated with the help of CAPM equation

Q: A stock has an expected return of 11.5 percent, the risk-free rate is 3.2 percent, and the market…

A: Expected return of a stock can be computed by using capital asset pricing model: Here, Expected…

Q: Assume the expected return on the market is 18 percent and the risk-free rate is 4 percent.…

A: Expected return means the percentage of profit that investor is expected depending upon the risk…

Q: The common stock of Flavorful Teas has an expected return of 14.82 percent The return on the market…

A: GIVEN, RE= 14.82% RM= 13% RF= 3.9%

Q: The common stock of Peeta Inc. has an expected return of 15.0%, the risk-free rate is 3.20%, and the…

A: Calculate the beta as follows:

Q: Assume the expected return on the market is 9 percent and the risk-free rate is 4 percent. What is…

A: CAPM Model: Expected return on Stock = Risk free Rate + Beta x ( Market risk Premium) Market risk…

Q: JaiLai Cos. stock has a beta of 0.6, the current risk-free rate is 6.0 percent, and the expected…

A: The following information has ben provided in the question: Beta =0.6 Risk free rate =6% Expected…

Q: JaiLai Cos. stock has a beta of 0.8, the current risk-free rate is 6.6 percent, and the expected…

A: Formula Cost of equity = Risk free rate+[Beta*(Market return-Risk free rate)] Where Risk free rate =…

Q: Cooley Company's stock has a beta of 1.40, the risk-free rate is 4.25%, and the market risk premium…

A: According to CAPM  Required rate =Risk free rate +Beta x market risk premium

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.