Ask Question

Suppose the beta of Microsoft is 1.13, the risk-free rate is 3 percent, and the market risk premium is 8 percent. Calculate the expected return for Microsoft.

+2
Answers (1)
  1. 5 March, 22:05
    0
    8.65%

    Explanation:

    Rj = Rf + risk premium.

    Rj = Rf + β[E (RM - Rf) ].

    = 3 + 1.13 (8 - 3)

    = 3 + 1.13 x 5

    = 3 + 5.65

    = 8.65 percent

    This relationship between risk and expected return is called the security market line.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Suppose the beta of Microsoft is 1.13, the risk-free rate is 3 percent, and the market risk premium is 8 percent. Calculate the expected ...” in 📗 Computers & Technology 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