The company has a beta of 1.3. The risk-free rate is 8% and the market return is 16%. What is the…
The expected return is 18.4%. The CAPM calculation is \(R_f+\beta(R_m-R_f)\) \(=8\%+1.3(16\%-8\%)\) \(=18.4\%\); 10.4% is the risk premium alone.
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The company has a beta of 1.3. The risk-free rate is 8% and the market return is 16%. What is the expected return of the company's stock based on the CAPM?
Answer and explanation
Correct answer C
The expected return is 18.4%. The CAPM calculation is ; 10.4% is the risk premium alone.
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Karnataka SET (KSET)