Ask Question
11 December, 21:09

A stock has an expected return of 10.45 percent, its beta is. 93, and the risk-free rate is 3.6 percent. What must the expected return on the market be?

+3
Answers (1)
  1. 11 December, 21:23
    0
    Expected market return will be 10.97%

    Explanation:

    CAPM is method to calculates the expected return value using beta of the investment risk free rate and market premium of that investment.

    According to CAPM

    Expected Return Rate = Risdt free rate + Beta (Market risk Premium)

    Expected Return Rate = Risdt free rate + Beta (Market Return - Risk free rate)

    10.45% = 3.6% + 0.93 (Market return - 3.6%)

    10.45 - 3.60 = 0.93 (Market return - 3.6%)

    6.85 / 0.93 = Market return - 3.6%

    7.37 + 3.60 = Market return

    Market Return = 10.97%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “A stock has an expected return of 10.45 percent, its beta is. 93, and the risk-free rate is 3.6 percent. What must the expected return on ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers