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Calculate the security rate of return

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Reference no: EM132979418

Question - The market price of a security is £40, the security expected return is 13%, the riskless rate of interest is 7%, and the market risk premium [E(Rm - Rf)], is 8%.

If its expected future payoff remains the same but the covariance of its rate of return with the market portfolio doubles then, according to the CAPM (show all the details of your calculations):

i) Calculate the security's rate of return?

ii) Calculate the security's current price?

Reference no: EM132979418

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