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According to the CAPM, what is the expected market return given an expected return on a security of 15.8%, a stock beta of 1.2, and a risk-free interest rate of 5%?

Respuesta :

Ritmeks

Answer:

14%

Explanation:

The expected return on security is 15.8%

The stock beta is 1.2

The risk free interest rate is 5%

Therefore the expected market return can be calculated as follows

15.8= 5 × 1.2mrp

15.8-5= 1.2MRP

10.8= 1.2MRP

Mrp= 10.8/1.2

= 9%

Expected market return= 5% + 9%

= 14%

Hence the expected market return is 14%